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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: bart13 who wrote (71461)10/9/2006 2:03:04 PM
From: kris b  Read Replies (1) of 110194
 
Bart, this supports your global liquidity chart.

www.morganstanley.com/GEFdata/digests/20061009-mon.html

Is he right? Does anybody care to comment?

"Derivatives, or not, I have a very simple view of what drives the global liquidity cycle -- central banks. That’s not because of their control over the commercial banking system. Indeed, because of the rapid growth of cash capital markets and derivatives, the banking sector has lost market share steadily in the intermediation of total credit. According to IMF statistics, the combined capitalization of global equity markets plus the outstanding value of debt securities totaled US$96 trillion in 2005 -- fully 73% larger than the assets of the world’s commercial banks. With loan-to-asset ratios typically in the 60% range, that would put cash positions in global equities and bonds at nearly three times the volume of worldwide bank lending. Despite the banking sector’s relatively declining slice of total credit intermediation, I still believe that central banks are key in anchoring the markets through their impacts on inflation and inflationary expectations. Their creation of high-powered money -- and the price they set for overnight funding -- remain the defining characteristics of the global liquidity spigot."
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