Monitoring the Monetary System and the Flow of Capital for Forecasting the Business, Financial and Currency Cycle - and Investing in the Emerging Economies from the Euro Global Reserve Currency - on lucabindi.com
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Asset Prices vs GDP - Zerohedge
But trouble begins when the system gets seriously out of whack. People begin to question why their money has any value at all if the central banks can just print up as much as they want. Any time they want. And hand it out for free in unlimited quantities to the banks. Who have their own mechanism (i.e., fractional reserve banking) for creating even more money out of thin air.
Pretty slick, right? Convince everyone that something you literally make in unlimited quantities out of thin air has value. So much so that, if you lack it, you end up living under a bridge, starving.
Let's express this visually.
“GDP” is a measure of the amount of goods and services available and financial asset prices represent the claims (it's not a very accurate measure of real wealth, but it's the best one we’ve got, so we’ll use it). Look at how divergent asset prices get from GDP as bubbles develop:
Ratings-New York-11 December 2017: The total amount of global
negative-yielding sovereign debt remains at elevated levels despite the
European Central Bank's (ECB) plan to reduce monthly asset purchases
amid improving economic fundamentals in the Eurozone, according to Fitch
Ratings. As of Dec. 4, 2017, there was $9.7 trillion of
negative-yielding sovereign debt outstanding, up from $9.5 trillion on
May 31, 2017 and $9.3 trillion one year ago.
Fonte: Fitch: $9.7T of Neg Yielding Debt Despite Monetary Normalization