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Here’s Why The Fed Has Been More Insane Than the PBoC, and The ECB Tries But Fails

Relative Growth of Central Bank Balance Sheets 2003-14 - Click to enlarge

I saw this chart on Twitter the other day.

The point of it was that the PBoC makes the rest of the world’s central banks look like pikers in terms of how much they have expanded their balance sheets. Wolf Richter also wrote a post about this phenomenon.

Relative Growth of Central Bank Balance Sheets 2003-14 - Click to enlarge
Relative Growth of Central Bank Balance Sheets 2003-14 – Click to enlarge

But is the PBoC really worse than the rest of the criminals who run the world’s money printing business?

Relative index charts are funny things. You can make them show different relationships based on the start date. This chart represents change rates from the base year of 2003, but if the base year is 2008, you would see a very different result.

Yes, the PBoC was running wild from 2003 to 2008 as it tried to maintain the Yuan peg against a falling dollar. But since 2008 the PBoC has grown its balance sheet by “only” 90%. Since 2008 the Fed has grown by around 700%.  Who’s the irresponsible central bank over the past six years?

After I tweeted my thought to him, the next day Zschaepitz agreed and illustrated it with another nice chart, this time beginning in 2008.

From 2003 to to the present the Fed’s balance sheet has grown by 570%. The PBoC has grown by approximately 572%. There isn’t much difference between the two. The primary difference is that the PBoC’s period of greatest madness preceded the Fed’s, but the Fed has caught up. The PBoC is run by a criminal gang that tells us what it wants us to know. As Wolf pointed out in his piece, we don’t really know the facts on just how big the PBoC balance sheet really is. But the Fed’s balance sheet has grown 8 times faster than what the PBoC has reported. If that’s not criminally insane, what is? The Fed may be less opaque than the PBoC, but it is just as criminal.

The data that we do have does not support the idea that the PBoC is any worse than the Fed. Over the past 6 years, the Fed has outprinted the PBoC by orders of magnitude and has caught up with the PBoC in its monetary madness.  At least when the PBoC was printing in multiples from 2003 to 2008, it ostensibly had a reason- to keep its export economy expanding at a rapid clip by suppressing its currency against the dollar. Since that need has abated, the PBoC has been a relative model of decorum since 2008. The Fed has been anything but. Its excuses have been flimsy.

As for the ECB, it has talked the talk of a money printer but it hasn’t walked the walk. It is prevented from doing so by its own rules and by a stupidly conceived negative deposit rate that encourages its member banks to do the opposite of what the ECB wants, and extinguish their deposits at the ECB by paying down their loans from the ECB. The sham programs the ECB has devised to buy limited amounts of paper haven’t completely overcome the downward pressure on the balance sheet exerted by the negative deposit rate.

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