The hand of god

The financial crisis, subsequent Eurozone debt crisis and Japanese reflation (in name only) transformed the role of power money. Central banks became the principal support mechanism for the financial system, propping up the leverage that had grown during the great moderation. By the end of 2019, central bank “power money” had doubled as a share of global GDP since 2007, from around 7% to 14%. Now Covid-19 and the global shutdown have pushed economies back into the deepfreeze. Governments have reacted with aggressive fiscal packages. But it has been the world’s main central banks that have delivered the real firepower, in an effort to prop up the inverted credit pyramid and avoid another vicious wave of deleveraging.

To read the full report - Login or Subscribe