The happiness and the unbearable sunshine of spring is basking the monetary dreamland of the advanced economies... Based on the latest data, world's "leading" central banks continue to prime the pump, flooding the carburetor of the global markets engine with more and more fuel.
According to data collated by Yardeni Research, total asset holdings of the major central banks (the Fed, the ECB, the BOJ, and PBOC) have grown in April (and, judging by the preliminary data, expanded further in May):
May and April dynamics have been driven by continued aggressive build-up in asset purchases by the ECB, which now surpassed both the Fed and BOJ in size of its balance sheet. In the euro area case, current "miracle growth" cycle requires over 50% more in monetary steroids to sustain than the previous gargantuan effort to correct for the eruption of the Global Financial Crisis.
Meanwhile, the Fed has been holding the junkies on a steady supply of cash, having ramped its monetary easing earlier than the ECB and more aggressively. Still, despite the economy running on overheating (judging by official stats) jobs markets, the pride first of the Obama administration and now of his successor, the Fed is yet to find its breath to tilt down:
Which is clearly unlike the case of their Chinese counterparts who are deploying creative monetarism to paint numbers-by-abstraction picture of their balance sheet.
To sustain the dip in its assets held line, PBOC has cut rates and dramatically reduced reserve ratio for banks.
And PBOC simultaneously expanded own lending programmes:
All in, PBOC certainly pushed some pain into the markets in recent months, but that pain is far less than the assets account dynamics suggest.
Unlike PBOC, BOJ can't figure out whether to shock the world's Numero Uno monetary opioid addict (Japan's economy) or to appease. Tokyo re-primed its monetary pump in April and took a little of a knock down in May. Still, the most indebted economy in the advanced world still needs its central bank to afford its own borrowing. Which is to say, it still needs to drain future generations' resources to pay for today's retirees.
So here is the final snapshot of the "dreamland" of global recovery:
As the chart above shows, dealing with the Global Financial Crisis (2008-2010) was cheaper, when it comes to monetary policy exertions than dealing with the Global Recovery (2011-2013). But the Great "Austerity" from 2014 on really made the central bankers' day: as government debt across advanced economies rose, the financial markets gobbled up the surplus liquidity supplied by the central banks. And for all the money pumped into the bond and stock markets, for all the cash dumped into real estate and alternatives, for all the record-breaking art sales and wine auctions that this recovery required, there is still no pulling the plug out of the monetary excesses bath.