Friday, March 10, 2017

Why You Don't Put All Your Eggs In One Basket - Central Bank Edition

Below is a chart detailing the total assets held by all Federal Reserve Banks, and the ECB(European Central Bank). In other words this represents the total amount of bonds, and other assets they have purchased.It's mostly comprised of government and agency debt for both entities, plus a few private sector assets.. For the most part their balance sheets mirrored each other. Then the Fed took a large lead in 2013, but recently the ECB has started to catch up with their own quantitative easing program.

Combined they are the biggest single holders of government & agency debt in the world at $8.26 trillion. Not exactly what a good financial advisor such as MAD Consulting would recommend.

Remember the old saying "Don't put all your eggs in one basket"?

Now a lot of smart people work at both institutions, but maybe the need a reminder. I don't see this ending well.

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