About half of that is from central banks. In other words, monetary authorities, which conjure fiat currency into existence out of thin air, are using much of that “funny money” to gobble up real assets — propping up stock prices but eroding the value of people’s savings through inflation of the currency supply. The significance of the findings is monumental.
By far the largest overall central bank-controlled investor is the Communist Chinese dictatorship’s “State Administration of Foreign Exchange (SAFE),” which is part of the regime’s central bank known as the “People’s Bank of China.” According to the survey, SAFE has almost $4 trillion under management, including massive stakes in publicly traded European companies. Beyond SAFE, Beijing’s central bank has also been directly scooping up minority positions in key European companies and industries. Other Asian central banks are becoming giant players in equities, too.
While the privately owned U.S. Federal Reserve System has apparently been sticking with government bonds and mortgage-backed securities, its own massive role in distorting markets and central planning has been documented extensively by this magazine and countless analysts. Among other radical measures, the U.S. central bank has showered trillions of dollars on crony megabanks around the world. Since the economic crisis, the Fed has also engaged in currency printing on an unprecedented scale, euphemistically referred to as “quantitative easing,” or QE. Its balance sheet is now over $4 trillion and still growing.
The shocking data on central banks’ activities in the market, released on June 17, came from a survey compiled by the global research and advisory organization known as the Official Monetary and Financial Institutions Forum (OMFIF). The Global Public Investor (GPI) 2014 publication, for the first time, takes a broad look at some $29.1 trillion in investments held by hundreds of public-sector institutions in more than 160 countries. Among those entities are 157 central banks, 156 government pension funds, and almost 90 sovereign-wealth funds.
“In the aftermath of the financial crisis different forms of ‘state capitalism’ have come to the fore,” the report authors said in a statement about their findings, referring to the sort of pseudo-“capitalism” run by the Communist Party regime in Beijing and like-minded governments around the world. “Whether or not this trend is a good thing may be open to question. What is incontestable is that it has happened.” In all, the survey suggests public entities now own assets equivalent to about 40 percent of global output — a staggering number suggesting that governments and central banks literally control the supposedly “free” markets.
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Photo of trading floor of the New York Stock Exchange