Monetary Policy influencing commodities and finance, and damaging the economy.
Who or what is driving these lines!?
As you can see, concerning M2 Nominal Money Velocity vs Central bank Assets, since early 2006, the economic activity associated with M2, has decreased from 2 times units of goods and services per 1 unit of money (M2), to, 1,54 times units of good and services per 1 unit of money (M2).
(Velocity of money measures the rate at which money changes hands)
The speed and the amounts of which money is being printed, under the form of Quantitative Easing programs and other new means / operations, has no parallel in recent central bank history, as you can see here in this graph with information about the USA M2 Money velocity
Historically, Monetary Aggregates haven't grown in this way... this is getting out of control, because even when countries had achieved some growth, that was used in the 1st place to justify "Money printing", the Quantitative Easing (QE) programs haven't been reversed! ▼
Accordingly to John Kay, one of Britain's foremost economist's, "QE is less about supporting economic growth than keeping the world's banks afloat and underpinning the status quo of global banking." Has explained in the Article - "Are central banks sowing the seeds of a greater crisis?"
Concerning the economy, has you can see in our previous post, the new QE programs, the "New Money", isn't arriving at the real economy
and / or to the Post on this Blog
In the First IMF "Financial Stability and Systemic Risk Forum", held in Washington DC, in March 8th, 2013, more specifically in the presentation made by William White, and in the IMF Summary Press we can find the following info @ Page 10"...Third, a wide variety of ultra easy monetary policies (ECB vs. the Fed vs. the Bank of England) have all failed to stimulate “sustainable” growth. Moreover, we do not know why...."
The reason they "don't know why", is because they are focusing largely in the financial system and in the monetary policy. The main reason why, besides all the Ultra Easing Monetary Policies promoted by some Central banks, aren't working concerning the creation of sustainable growth, is because, those economies are largely unbalanced, concerning their Debt, Budget, Current Account and Savings, because of the Reversed Sustainability effect, that is presented and can be viewed, here. Because of this effect, the money will flow away from the economy and will support growth somewhere else (for their creditors). Consequently it is also "supporting" and inducing inflation somewhere else (their creditors, the BRICS and others). What happen's if this situation is reversed and the tools to manage this aren't there or cannot be used?
Further more, we know that, The QE programs or their newly found "Printed Money", didn't went to Savings ▼
Enlightening isn't it !?...
....if you add and join the information concerning: Growth, Commodities and Financial Markets...
....if you add and join the information concerning: Growth, Commodities and Financial Markets...
(that can be viewed here, in a previous article in this blog)
http://the-man-i-fest.blogspot.pt/2013/03/about-myths-monetary-vs-finance-vs.html
... it helps you understand that Money (M2) (printed money, quantitative easing, asset purchase, and other forms of money that are currently being injected by Central Banks), because of the way that this is being done, nowadays "New Money" isn't going to the economy.
Mainly, what happen's is:
Instead 1st goes to financial institutions related with investment banking and proprietary trading (in stead of going to commercial and development banks), then goes to financial markets under the form of derivatives mostly, then it spins around and around in the financial markets, throughout Commodities and speculative operations, were it is subtracted and even more reduced, inclusively, by the corporate bank bonus and commissions. Finally, when a small part of the money (M2) arrives to the economy, to fund the entrepreneurs, to support corporate bonds, venture capital and stocks, then it starts to do what it was supposed to do in the 1st place: IT was supposed to SUPPORT THE ECONOMY.
The following note, was added on April 14th, 2013
The problem isn't about the stimulus programs (more info in our previews post, here). It is about the way the stimulus is being applied (worldwide), because currently the money isn't going towards the economy, in order:
1) to support companies and entrepreneurs, developing and creating new ideas and new products, innovating;
2) to convert and adapt the skills and the knowledge of the unemployed, helping them to integrate the new economy;
3) to transform the industry and the productive platform in the country, building a new paradigm towards Sustainable Growth;
4) to duly and fully reform the Sovereign States, concerning their budgets and the way they are currently managed;
...
Because, current institutions aren't able to apply, promote and deliver the "Money" to the real economy, other (different) must be created a) under the form of state development banks and b) Mutualism Banking systems (owned by the investors as much as by the clients), both, dedicated only to support SME's and entrepreneurs.
4) to duly and fully reform the Sovereign States, concerning their budgets and the way they are currently managed;
...
Because, current institutions aren't able to apply, promote and deliver the "Money" to the real economy, other (different) must be created a) under the form of state development banks and b) Mutualism Banking systems (owned by the investors as much as by the clients), both, dedicated only to support SME's and entrepreneurs.
c) Corporations that need funding to support new lines of products or to support exports, should have the ability to access specific "lines" of credit, made available by the banks that were helped during the stimulus programs, and, by the government, in order to develop and expand their projects.
Here are different examples, that were presented by the following sources, concerning finance, stock markets and the banking system:
This graph was presented and belong's to the zerohedge.com, website
The following graphs were presented by Fox New's, here
More examples could be presented in order to explain the following: The main problem is,
Monetary Policy is influencing Commodities, Finance and the Stock Markets. But above all, because of the way which current (during the past 4 years) monetary policy is being managed and applied, it is damaging the Real Economy.
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