Developed world monetary base 3x that of 2008

Via ZeroHedge:

14 years after LTCM, we know that the previous quarter century was just child’s play. The central banks have to pay a lot more for optimism today. Loans aren’t enough; now they must give the money away. Printing presses are running flat out…and the developed world monetary base is almost three times higher than it was at the start of 2008…

The progression from the $1.5 billion Chrysler rescue to the current multi-trillion dollar worldwide financial support operations seems to parallel the march from the first US forestry service attempts to limit forest fires about a century ago to the far more sophisticated efforts possible today. Although the forestry service is successful limiting small fires, the longer they suppress them, the higher the probability of a highly disastrous, totally uncontrollable conflagration. Studies have shown that the onset of that catastrophe is almost totally unpredictable.

By suppressing small fires, the forests approach an unstable state where the dead wood, resulting from the natural cycle of birth and death in the wild, is piled high, ready to explode into flames if the conditions are right. The central banks and other governmental authorities have piled the money so high that bubbles are popping up everywhere.

Four years ago we asked what would happen if the deleveraging process then underway had much further to go. Now we know part of the answer. The Western world’s governments printed money, and China didn’t deleverage at all. It decided to massively increase leverage by $1.7 trillion in real estate loans that created empty cities. And nothing at all has been done to bring transparency and order to the credit default swap world, now estimated at $32 trillion. Hard to imagine this ending without serious inflation, whatever the merits of the forest fire metaphor.

One Response to “Developed world monetary base 3x that of 2008”

  1. feeblemind Says:

    Wretchard at Belmont Club has a post up today about the economic crisis and wondering if our civilization will collapse due to the fact that our leaders can’t/won’t think outside the box. They keep doubling down on failed policies, reinforcing failure and wondering why things are not improving.

    To bolster his case, he refers to this article by Niall Ferguson:

    Niall points out that when nations/empires collapse, they do it quickly.

    Niall says, “In my view, civilizations don’t rise, fall, and then gently decline, as inevitably and predictably as the four seasons or the seven ages of man. History isn’t one smooth, parabolic curve after another. Its shape is more like an exponentially steepening slope that quite suddenly drops off like a cliff.

    What all these collapsed powers have in common is that the complex social systems that underpinned them suddenly ceased to function. One minute rulers had legitimacy in the eyes of their people; the next they didn’t.

    This process is a familiar one to students of financial markets. Even as I write, it is far from clear that the European Monetary Union can be salvaged from the dramatic collapse of confidence in the fiscal policies of its peripheral member states. In the realm of power, as in the domain of the bond vigilantes, you’re fine until you’re not fine—and when you’re not fine, you’re suddenly in a terrifying death spiral.”

    Nialls goes on to enumerate what he calls ‘killer apps”, the traits that caused the West to rise above the rest of the world and he wonders if we are slowly deleting these apps from our operating system.

    He has a 4 minute video up at the article that is worth watching as well.

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