09/07/2017 - Daniel Lacalle: Are Central Banks Nationalizing The Economy?
“The FT recently ran an article that states that ‘leading central banks now own a fifth of their governments’ total debt.’
The figures are staggering.
•Without any recession or crisis, major central banks are purchasing more than $200 billion a month in government and private debt, led by the ECB and the Bank of Japan.
•The Federal Reserve owns more than 14% of the US total public debt.
•The ECB and BOJ balance sheets exceed 35% and 70% of their GDP.
•The Bank of Japan is now a top 10 shareholder in 90% of the Nikkei.
•The ECB owns 9.2% of the European corporate bond market and more than 10% of the main European countries’ total sovereign debt.
•The Bank of England owns between 25% and 30% of the UK’s sovereign debt.
The Bank of Japan, with its ultra-expansionary policy, which only expands its balance sheet, is on course to become the largest shareholder of the Nikkei 225’s largest companies. In fact, the Japanese central bank already accounts for 60% of the ETFs market (Exchange traded funds) in Japan.
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The central bank can ‘print’ all the money it wants and the government benefits from it, but the ones that suffer financial repression are the rest. By generating subsequent financial crises through loose monetary policies and always being the main beneficiary of the boom, and the bust, the public sector comes out from these crises more powerful and more indebted, while the private sector suffers the crowding-out effect in crisis times, and the taxation and wealth confiscation effect in expansion times.
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It is a clever Machiavellian system to end free markets and disproportionately benefit governments through the most unfair of competitions: having unlimited access to money and credit and none of the risks. And passing the bill to everyone else. If you think it does not work because the government does not do a lot more, you are simply dreaming.”
