Central Banks Are Going ‘All In’ on Creating The Mother of All Bubbles
The comments below are an edited and abridged synopsis of an article by Phoenix Capital
Stocks hit a new all-time high last week, and the media is trying to attribute this move to Joe Biden picking various people for his cabinet. However, Biden has yet to actually win the election. Moreover, the market moves are occurring at totally different times from the announcements of the Biden campaign.
So what is pushing the market higher? The Fed and other central banks are. The Fed’s balance sheet exploded by over $60 billion last week, pushing it to new all-time highs of $7.2 trillion. All told, the Fed has expanded its balance sheet by $3.1 trillion this year.
To put that into perspective, in response to the Great Financial Crisis, the Fed expanded its balance sheet by this same amount over the course of five years from 2008 to 2013.
Put another way, it took the Fed five years to spend the same amount of money during the worst financial crisis and recession in 80 years. This time around, the Fed spent it in eight months.
If you want a reason for stocks exploding to new all-time highs over and over again, it’s this tsunami of liquidity the Fed has provided.
And the Fed is not the only one; the ECB’s balance sheet also hit a new-all time high last week.
Forget Joe Biden or Donald Trump; globally, central banks and governments have spent $14 trillion this year. We’re talking about an amount of money equal to the GDP of China (the 2nd largest economy in the world).
That money has to go somewhere. And much of it has gone into stocks, where it is creating the mother of all bubbles.