The largest owner of U.S. debt, China sold $18 billion of U.S. Treasury debt in December.
And it's not alone. Japan sold even more: $22 billion. In the past year, Mexico, Turkey and Belgium have also lowered their holdings of U.S. debt, all of which have led to a record annual dump by central banks.
Many countries are suffering from the global economic slowdown, forcing central banks to pull out all the stops to help buttress their economies.
Let’s see… U.S. corporate earnings have been going down for three quarters in a row. The median household income is lower than it was 10 years ago. And now JPMorgan Chase has increased its estimated risk of a recession to about one in three.
These things might make sober investors wonder: Is this a good time to pay some of the highest prices in history for U.S. stocks Apparently, they don’t think about it…
Low Workforce Participation Rate, Amid an Improving Economy, Nags at Economists
A more buoyant economy and tightening labor market were supposed to draw in those now sitting on the margins. But the probability of a worker re-entering the labor force continues to slump. Over the past three months, an average of 6.8% of those outside the labor force either found a job or began looking for one. That means people are entering the labor force at the lowest pace in records kept since 1990, down from more than 8% in 2010....
In December 2007, the month the recession started, 66% of the working-age population either had a job or was looking for one. That share fell during the recession and has continued dropping ever since. In September, participation dropped to 62.7%, the lowest since 1978, and remains near that level....
. The size of the workforce is a key determinant of how fast the economy can grow. A smaller workforce presents a drag to growth.
"I think it is more dangerous for central banks to forever deny what they are doing," says Lord Turner.
He calls Japan's move to issue government debt at a rate of 40 trillion yen, while the central bank expands its balance sheet at a rate of 80 trillion yen a year, "a de facto debt monetisation".
"You are effectively replacing government debt with central bank money," says Lord Turner. "It would be better for authorities to publish a statement, laying out the rules and assuring the world it is not too much."...
Eight years on the from the Great Recession, voices as authoritative as the International Monetary Fund and the Bank of International Settlements - dubbed the 'central bank of central banks' - have called time on the era of extraordinary monetary policy.
Having hoovered up $12.3 trillion (£8.5 trillion) in financial assets and carried out 637 interest rate cuts since 2008, central banks have been stunned back into action in the last six weeks.
The Bank of Japan kicked off a new round of global easing with its decision to cross the rubicon into negative interest rate territory on January 29.
Eurozone policymakers followed suit earlier this month with a triple whammy of interest rate cuts, €20bn in additional asset purchases a month, and an unprecedented move to allow commercial banks to borrow money at negative rates.
(Central banks now consider seizing gov's fiscal authority and ending the pretense of representative gov)
Thinking the unthinkable
Faced with political intransigence, central bankers are openly talking about the previously unthinkable: "helicopter money".
A catch-all term, helicopter drops describe the process by which central banks can create money to transfer to the public or private sector to stimulate economic activity and spending.
Long considered one of the last policymaking taboos, debate around the merits of helicopter money has gained traction in recent weeks.
ECB chief Mario Draghi has refused to rule out the prospect, saying only that the bank had not yet “discussed” such matters due to their legal and accounting complexity. This week, his chief economist Peter Praet went further in hinting that helicopter drops were part of the ECB's toolbox.
"All central banks can do it", said Praet. "You can issue currency and you distribute it to people. The question is, if and when is it opportune to make recourse to that sort of instrument"....
From June, eurozone banks will be paid as much as 0.4pc to borrow from the ECB for four years - a scheme dubbed 'Targeted Long-Term Refinancing Operations' (TLTRO's). Lenders who do the most to pass on cheap loans to customers will be rewarded with the most favourable rates.
BofA's summary: "clients don’t believe the rally, continue to sell US stocks" and they were selling specifically to corporations whose repurchasing activity is near all time highs: "buybacks by corporate clients accelerated for the third consecutive week to their highest level in six months, which is also above levels at this time last year."
Second, and more important, is that as Bank of America reported earlier this week, in the latest week "during which the S&P 500 climbed 1.1%, BofAML clients were net sellers of US stocks for the seventh consecutive week. Net sales of $3.7bn were the largest since September and led by institutional clients (where net sales by this group were the second-largest in our data history). Hedge funds and private clients were also net sellers, as was the case in each of the prior two weeks, but a different group has led the selling each week. Clients sold stocks across all three size segments, and net sales of mid-caps were notably the largest since June ’09."