Global Central Bank Balance Sheet Cracked!

20 déc. 2023

Global Central Bank Balance Sheet denominated in USD has broken the uptrend line down almost 16% or $5 trillion which is about 5% of Global GDP.

Why does that matter to you? Because there are $5 trillion more bonds available that have been invested in the bond market which takes away from other asset classes.

While global debt has skyrocketed (meaning more S available) it does not negate the fact that $5 trillion would have flowed into other asset class investments. Most notable stocks.

You can think of it as more bonds available more dollars will be absorbed like a sponge from other investments. So if you are buying stocks you want the Central Bank balance sheet to keep rising via QE.

A quick lesson on QE. Central banks buy bonds from the open free market in exchange for $. Less bonds more S that can flow into other asset classes like stocks.

Note that some people use the term "Reserves" instead of dollars. This confuses many people. All that "Reserves" mean is that those $ reside within the banking system. As such they call them Reserves. Once Reserves are removed from the banking system into cash or other investments they are once again called dollars Yen Pound etc...

Lastly, do not make the mistake and call the unwinding of the central bank's balance sheet QT (Tightening). This is a click bait term to imply something bad. Whenever you hear QT replace the (T) with N (Normalizing) QN. As bonds mature and fall off the balance sheet.

Unwinding the CB balance sheet is to NORMALIZE!
QT would be if the CB's were selling bonds back into the free market at a rapid rate. Which is NOT the case currently.

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Note

Global central banks balance sheet continue to normalize.