The Cost Of Saving The Economy: $1.7 Billion Per Hour Every Hour
Back in 2014, Citigroup’s Matt King calculated that it costs central banks $200 billion per quarter to avoid a market crash. Boy have things changed since then.
After another modest dip in the market was bought with frenzied gusto this morning, BofA chief investment strategist Michael Hartnett writes in his latest Flow Show note that “investors have zero fear of central banks”, to which one can add that investors fully expect central banks to bail out even the tiniest market dip.
And who can blame them? On Wednesday, the New Zealand Central Bank – which as a reminder is now tasked with also containing the country’s massive housing bubble it helped create – balked at raising rates this week after the country announced a fresh round of lockdowns due to one covid case, despite NZ house prices up 30%.
But there is another, more tangible reason, why investors feel emboldened by central banks. As Hartnett calculates, the Fed has bought $4 trillion bonds in the past 18 months, twice the amount the US spent on War in Afghanistan past 20 years…
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