What happens when $2 trillion is sucked out of the global economy? It may not be pretty

CNN ^ | Fri May 19, 2023 | Julia Horowitz

[MinorityRepublican]

Central banks have been credited with averting a global depression twice over the past 15 years: Once after the 2008 financial crisis, and again at the height of the coronavirus pandemic.

But the tactics they deployed to restore confidence and keep money flowing from banks to the economy amounted to a high-stakes experiment — one that may be impossible to unwind without destabilizing the financial system.

Central banks purchased tens of trillions of dollars worth of government bonds and other assets in a bid to bring down longer-term borrowing costs and stimulate their economies. This measure, known as “quantitative easing,” or QE, created a flood of cheap cash and gave policymakers newfound sway over markets. Investors called it the era of “easy money.”

But since inflation hit its highest level in a generation last year, central banks have embarked on the quest — unprecedented in scale — of shrinking their bloated balance sheets by selling securities or letting them mature and disappear from their books. “Quantitative tightening,” or QT, by top central banks will suck $2 trillion in liquidity out of the financial system over the next two years, according to a recent analysis by Fitch Ratings.

A liquidity drain of that magnitude could amplify strains on the banking system and markets, which are already grappling with a sharp run-up in interest rates and edgy investors.

[Jim Noble]

Do you have a Degree in Business and/or major in econ?

Nope.

But I do know that anyone who was a billionaire in Reichsmarks on April 30, 1945 was a pauper when the Red flag was raised over the Reichstag.

[Elsie]

{Bottom line they are preparing for a non monetary digital system...}

We already have this.

Only old coots like FReepers use ‘money’ any more.

The youngsters use ‘credit’ cards.

[Old Yeller]

Welcome your new overlords and the digital currency.