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In the wake of the 2008 financial crisis and market crash, most ordinary people have gotten out of the stock market and refuse to buy stocks. So the central banks have come to the rescue. The question is, is this sustainable? How long can they do this? How long will they want to do this? They now have the power to crash the markets as well--and blame it on Donald Trump's policies.
In the aftermath of the great financial crisis of 2008, global central banks began to buy stocks, bonds and other financial assets in very large quantities and they haven’t stopped since. In fact, as you will see below, global central banks are on pace to buy 3.6 trillion dollars worth of stocks and bonds this year alone. At this point, the Swiss National Bank owns more publicly-traded shares of Facebook than Mark Zuckerberg does, and the Bank of Japan is now a top-five owner in 81 different large Japanese firms. These global central banks are shamelessly pumping up global stock markets, but because they now have such vast holdings they could also cause a devastating global stock market crash simply by starting to sell off their portfolios….
According to Business Insider, global central banks are on pace to purchase an astounding 3.6 trillion dollars in stocks and bonds in 2017.
Overall, the five largest global central banks now collectively have 14.6 trillion dollars in assets on their balance sheets.
You can call this a lot of things, but it certainly isn’t free market capitalism.
The Swiss National Bank is one of the biggest offenders. During just the first three months of this year, it bought 17 billion dollars worth of U.S. stocks, and that brought the overall total that the Swiss National Bank is currently holding to more than $80 billion.
Have you ever wondered why shares of Apple just seem to keep going up and up and up?
Well, the Swiss National Bank bought almost 4 million shares of Apple during the months of January, February and March.
And as I mentioned above, the Swiss National Bank “now owns more publicly-traded shares in Facebook than Mark Zuckerberg”…
Without unprecedented intervention by global central banks, financial markets would have crashed long ago.
And if they keep increasing their purchases of stocks and bonds, the central banks may be able to prop things up for a while longer.