Here’s Why I Think The Fed Is More Insane Than The PBoC

Yesterday I saw this chart on Twitter. Sorry I can’t find the original tweet. The point of it was that the PBoC makes the rest of the world’s central banks look like pikers in terms of how much they have expanded their balance sheets. Wolf Richter also wrote a post about this phenomenon.

Relative Growth of Central Bank Balance Sheets 2003-14 - Click to enlarge

Relative Growth of Central Bank Balance Sheets 2003-14 – Click to enlarge

But is the PBoC really worse than the rest of the criminals who run the world’s money printing business?

Relative index charts are funny things. You can make them show different relationships based on the start date. This chart represents change rates from the base year of 2003, but if the base year is 2008, you would see a very different result.

Yes, the PBoC was running wild from 2003 to 2008 as it tried to maintain the Yuan peg against a falling dollar. But since 2008 the PBoC has grown its balance sheet by “only” 90%. Since 2008 the Fed has grown by around 700%.  Who’s the irresponsible central bank over the past six years?

From 2003 to to the present the Fed’s balance sheet has grown by 570%. The PBoC has grown by approximately 572%. There isn’t much difference between the two. The primary difference is that the PBoC’s period of greatest madness preceded the Fed’s, but the Fed has caught up. The PBoC is run by a criminal gang that tells us what it wants us to know. As Wolf pointed out in his piece, we don’t really know the facts on just how big the PBoC balance sheet really is. But the Fed’s balance sheet has grown 8 times faster than what the PBoC has reported. If that’s not criminally insane, what is? The Fed may be less opaque than the PBoC, but it is just as criminal.

The data that we do have does not support the idea that the PBoC is any worse than the Fed. Over the past 6 years, the Fed has outprinted the PBoC by orders of magnitude and has caught up with the PBoC in its monetary madness. At least when the PBoC was printing in multiples from 2003 to 2008, it ostensibly had a reason- to keep its export economy expanding at a rapid clip by suppressing its currency against the dollar. Since that need has abated, the PBoC has been a relative model of decorum since 2008.


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