The European Central Bank (ECB) balance sheet has increased to 66% of the $12.5 trillion Eurozone economy which includes Germany, France, Italy, Spain and 15 other European countries.
ECB’s balance sheet has reached a new all time high of €6.7 trillion as it keeps on printing with total assets rising by another €17.8 billion mainly on Quantitative Easing.
ECB’s balance sheet now equals 66% of the Eurozone Gross Domestic Production (GDP), while Fed is at 37% with the Bank of Japan standing at 136% of their GDP.
In the past four years ECB’s balance sheet has risen by more than 3x, with some $3 trillion added to it just this year.
The amount of money printing therefore has reached new levels, but the euro has maintained its purchasing power and has even increased it.
In fact, while inflation and even hyperinflation is a problem in some countries, here we have deflation.
Prices are falling in Europe even while tons of money is printed, something that clearly indicates there’s a very big problem here with the way the fiat block reward is distributed.
Just like in bitcoin miners get 6.25 BTC per block based on Proof of Work, in the euro, the central bank and to some extent the commercial banks get the interest in this $3 trillion they have printed through Proof of Authority (PoA).
The block reward in the euro therefore is not quite the $3 trillion, which is printed then destroyed when it is re-payed, although it is a temporary block reward for the receiver with Proof of Authority used again to decide who receives it.
The actual permanent block reward however is the interest paid on this $3 trillion which becomes permanent money.
This $3 trillion enters the economy through a very centralized route. The commercial banks give out mortgages or lend to the government, the central bank then buys these mortgages or bonds from the commercial banks, with the interest thus, and the block reward, chiefly going to banks.
As such, although there is plenty of money printing, it does not quite find its way into circulation because commercial banks have no interest in making risky loans. So they stick to safe mortgages and to lending to rich governments.
The rich in effect get the breadcrumbs of the block reward after it is fleeced by the banks, with the rest receiving not even the breadcrumbs as wages have stagnated or fallen since 1975.
The government is now taking a central role in borrowing to no end to then give it to the taxpayers who then have to pay it all back with interest to the bankers.
A chief example of this is the $1,000 Trump checks, which amounts to giving a child a $1 in the hope he somehow saves the economy because this $1,000 hardly made a dent in anyone’s pocket.
It was wasted money, and worse. Wasted borrowed money, which now has to be paid back and not the just $1,000, but with interest amounting in total to maybe even $2,000 or more by the time it is paid back, if it ever is.
Inflation is monetary supply times the velocity of money. On the former, there is plenty new supply. But of the latter, there is little velocity. And thus the very big problem.
A big problem because without productivity increases, the interest simply can’t be paid back. Here is the eurozone GDP:
A calamity. More than $1 trillion has been shaved off the Eurozone GDP during the first half of the year, while China’s GDP grew this year so far by 0.7%.
How? That remains a matter for international politics, with it remaining unclear at all why Europe is doing so badly, while China is now not only unaffected but growing, when it is the same virus hitting China and Europe.
Just as it is unclear why this new money is not making its way into circulation with one obvious answer being that the system is designed to channel the block rewards into the hands of the few who don’t flood the market but endlessly accumulate perhaps to emulate the ancient Pharaohs who buried themselves with riches and gold, keeping it outside the hands of the peasants in the idiotic thinking they will take it with themselves to the afterlife.
In short, the monetary system is broken, and perhaps by design. But, there’s always bitcoin, which gives out those block rewards based on Proof of Work, not Proof of Lagarde.