Financial panics are an integral part of capitalism. So are economic recessions. The system generates them and it becomes stronger because of them. Like forest fires, they are painful when they occur, yet without them, the forest could not survive. They impose discipline, punishing the reckless, rewarding the cautious. They do so imperfectly, of course, as at times the reckless are rewarded and the cautious penalized. Political crises -- as opposed to normal financial panics -- emerge when the reckless appear to be the beneficiaries of the crisis they have caused, while the rest of society bears the burdens of their recklessness. At that point, the crisis ceases to be financial or economic. It becomes political.
The graphic depicts the balance sheets of the Federal Reserve, Bank of England, European Central Bank and the Bank of Japan.
What will surprise many is that the Fed's balance sheet has shrunk for nearly a year and, as a percentage of GDP, its balance sheet is not as large as the other major countries.
In any event, it is reasonable to expect the balance sheets of these major central banks to expand in the months ahead.
Does the balance sheet surprise you? What are your expectations?
kurtS got a reaction from dbg in Stratfor Article: Hedge Fund Quits Because of Political Economy - How Does It Affect
kurtS got a reaction from priceless_knowledge in Central Bank's Balance Sheet to GDP ratio
