Money

Commodity Money (Gold)

Total amount of gold – 163,000 tons (World Gold Council, 2008)
30,000 tons (18%) of this is in the ‘official sector’ such as central banks.
27,000 tons (17%) is in ‘investments’ (i.e. gold hoarded by capitalists).
This implies about 35% of world gold is used for monetary purposes.
20,000 tons (12%) is used for industrial purposes, e.g. electronic circuits.
84,000 tons (51%) is used as jewellery. Much of this can be melted down & turned back into bullion. And so is used as a form of savings.

Roosevelt devalued the $ by 40%.
When Bretton Woods collapse, & after the Volcker Shock, the $ lost about 90% of its value – from $35 to around $350.
In the summer of 2007 the $ was about $675 to around $1,800 in August 2011 – about a 60% devaluation.
Appreciating to around $1,200 for most of the 2015-18 period.
Breaching $2,000 in 2020.

Credit Money

World Debt:

The total burden of world debt, private and public, has risen from 160 per cent of national income in 2001 to almost 200 per cent after the crisis struck in 2009 and 215 per cent in 2013.
(source: 16th Geneva Report, International Centre for Monetary and Banking Studies)

Debt Levels (major economies):

BofE-debt-to-gdp-ratios-in-majoreconomies

PNFC = Public Non-Financial Corporation

Source: Bank of England

Global Liquidity:
1990: 150% of world GDP
2006: almost 400% (mainly from derivatives, 4% in 1990 to 173% in 2006 [$600tr])
2011: 350% (derivatives 130%)

Source: http://thenextrecession.files.wordpress.com/2012/11/debt-matters.pdf

Bank Lending:

oecd-bank-lending

Source: http://thenextrecession.wordpress.com/2013/12/30/faster-growth-in-2014/

2008 Government Intervention:

QE1 (Nov 2008 to Nov 2009) – Fed purchases Treasuries worth $300bn, govt-sponsored mortgages worth $175bn & mortgage backed securities worth $1,250bn = $1,725bn

QE2 (Nov 2010 to June 2011) – Fed purchases $600bn worth of Treasuries

Operation Twist (Sept 2011 to Dec 2012) – Fed sells $667bn worth of short-term Treasuries for long-term ones

QE3 (Sept 2012 to ?) – ?

QE in the UK:
UK has done £845bn since 2009, half of this in 2020.
Stage 1 QE started in 2009 & was last used in 2016. It created £445bn of new money. That was used to buy £435bn of government bonds, or gilts, and £10bn of corporate bonds (£200bn in January 2009 & £175bn in October 2011 of govt bonds).
Buying gilts in the financial markets pushes up their price. And since the return paid on them is fixed if their price goes up the effective interest rate paid on them goes down.
QE boosted the balances on central bank reserve accounts. In 2009 these amounted to £42bn. In February 2020 they were £479bn. They have probably gone up by another £400 billion or more by now as a result of QE this year.
QE releases money to buy up assets.

 

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