Central distortionists

When I read the story that two companies had placed bonds privately with the European Central Bank, I just leaned back on my chair to grasp the message. Is this what market economy or capitalism all about? A central bank buying corporate bonds in a private placement?! Everything that we have been told or taught has been turned on its head here. It is so wrong in many respects. Yet, these folks are still being listened to and respected. No one dares call the emperor naked because their own nudity would be exposed.

I also learnt to my utter surprise and shock that the Swiss National Bank (SNB) is a big investor in global stocks, particularly US stocks. I really fail to fathom the logic behind it. See here and here.

In 1997, Swiss GDP was CHF415.6bn. The balance sheet of SNB was CHF68.3bn. SNB balance sheet was 16.4% of GDP. In 2015, Swiss GDP was CHF639.63bn. SNB balance sheet in June 2016 was CHF689.59bn. That works out to 107.8% of GDP. If not in Switzerland, SNB is busy fanning and inflating bubbles around the world. Do they ever reckon with the costs of what they are doing, let alone evaluating them?


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