A third of the world’s developed-market sovereign debt now has negative yields, based on Bloomberg bond indexes.
http://davidstockmanscontracorner.com/chart-of-the-day-global-bond-yields-reach-all-time-low/
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Never underestimate the power of a question
Robert, I propose that a new wealth aggregate be created: M4.
M3, of course, is the broadest measure of the monetary system, but I think it fails to capture the whole of the Credit Bubble Mania because the CBM is a feedback loop with total (perceived) wealth.
When bonds are wealth and rising asset prices axiomatically are rising wealth, then we are in a rising, inverted pyramid where borrowing to chase ever-rising prices in assets perversely means people feel wealthier and wealthier the more IOU’s are issued, driving prices higher, driving more borrowing, driving more credit instruments of decreasing trustworthiness, driving extensions of credit ever poorer credit risks,…..
All of this is an upward spiral of perception of wealth that is not captured by measuring components of M1, M2 or M3.
Decreasing interest rates conjure capital value in the Bond Ocean just as does the next marginal increasing in a share price transaction raise the market cap of a publicly traded corporation, and when there is a vast Bond Ocean already in existence it has the same effect as if a penny increase from the last sale to this one in stock XYZ occurs across a firm with a gazillion shares outstanding.
I have maintained all along that when the bond ocean was but a puddle a few decades ago, changes in rates simply didn’t have that much effect, just as a penny up or down in a stock with few shares outstanding doesn’t much affect the firm’s market cap.
Now that the total credit market is immeasurably large (and even difficult to estimate), small changes in rates have immeasurably immense effects on the underlying capital value.
In this way, I continue to see Central Bankers as the grown-ups who, as kids, played with matches around a pack of Black-Cat firecrackers, but now as adults they play with matches while standing in a narrow space between a huge facility that stores ammonium nitrate fertilizer and another huge facility that stores highly compressed natural gas.
The wealth of the world is now so vast that small changes at the margin create invisible tidal waves of rise and fall. My guess is that as the amplitude of these tidal waves (e.g., the one in oil) keep rising, sooner or later they set off a chain reaction. My guess is that there is no way to know in advance when that threshold will be breached.
I wish we could graph M4. We lack the raw data and even determining what to include is a daunting challenge. But the real Elliott Waves that ultimately matter would be there.