The creation of more money without any corresponding value in a probably futile attempt to shore up panicking capital markets has reached epic proportions by Friday. Central banks worldwide injected unprecedented amounts of freshly digitized money to keep players afloat which raises the question which bank will go bankrupt in the next days.
Given the leverage in the system I just cannot imagine that this financial storm will pass without fatalities.
Losses in share markets were broadbased with only precious metals stocks shining after gold spurted $18 from $658 to $676. Major US indices briefly saw positive territory when bond markets stabilized after the massive shots in the arm only to fall into the red again.
Quick reminder: In history it has never worked to try to print your way out of problems. Markets are now correcting the imbalances created by policymakers with ridiculously low interest rates in the new millennium.
Let's take a look how much the magicians at the digital printing presses in the central banks pulled out of their hats in the last 2 days.
- ECB: 155.8 billion Euros or $215 billion
- Fed: 35 billion dollars
- Japan: 1 trillion Yen or $8.5 billion
- Australia: A$ 4.95 billion or $4.2 billion
- Singapore: S$ 1.5 billion or $1 billion
- Canada: $1.1 billion
A Reuters story came up with even higher numbers, saying that central banks have created at least $323 billion in the last 48 hours.
Central banks in Malaysia, Indonesia, the Philippines and Taiwan sold Federal Reserve dollars to support their own currencies.
And What Is Plan B?
Seeing that the "rescue" operations of central banks are not working - or are they going to create a few 100 billion more next week - there is only one question left: What is plan B?