Global financial market has 6,2 trillion-dollar excess liquidity

Baku. 28 September. REPORT.AZ/ Excess liquidity in the amount of 6,2 trillion dollars are circulated in the global financial economy. Report informs referring to "Vestifinance.ru such calculation was made by Stephen Rach, senior fellow at Yale University who served for a long time as chairman of Morgan Stanley Asia.

In his article titled "Project Syndicate" referring to Bank for International Settlements (BIS) Stephen Rach wrote that after 2018 financial crisis combined asset holdings of central banks of USA , eurozone and Japan increased by $8.3 trillion expanding from $4.6 trillion to $12.9 trillion in 2017. Nevertheless, over this period nominal GDP in these regions increased by just $2.1 trillion.

As a result, $6.2 trillion excess liquidity was injected in global financial markets. This excess liquidity was not absorbed by the real economies instead it has been circulating in global financial markets.

For this reason, central banks’ monetary expansion led to growth of G7 economies at just a 1.8% over the 2010-2017. Although monetary expansion decision helped to recover economies that is short of the 3.2% average rebound recorded during the two recoveries of the 1980s and the 1990s.

Stephen Rach wrote that in case central banks do not reach their inflation targets they will start for ‘normalization” in other words they will rush to decrease their balances.

US Federal Reserve’s balance sheet stands at $4.5 trillion. ECB’s balance sheet is at €4.23 trillion or $5 trillion, Central Bank of Japan ‘s balance sheet amounts to $5.07 trillion.

Report informs central banks own over 30% of the global bonds of $54 trillion, or roughly $18 trillion.