On Monday of last week, global markets took in news from the Bank of Japan (BOJ) that they would be involved in more money printing operations. At the end of the BOJ announcement was the following:
“Regarding purchases of T-Bills, conducted as part of money market operations, the Bank will decide the purchase size per auction considering the effects on financial markets. The Bank will purchase about 500 billion to $3.0 trillion yen of T-Bills per auction for the time being.”
In addition to the just-mentioned statement, the BOJ indicated that they would be eliminating the ceilings on purchases of Japanese government bonds and would expand their purchases of corporate bonds. Combining all these steps, the BOJ suggested that by the end of 2021 it may increase its money supply by another $5 trillion.
How much is $5 trillion? As perspective, the $5 trillion is approximately equal to Japan’s entire GDP of $5 trillion. Nothing short of massive.
The moves by the BOJ are not too surprising. Other central banks have gotten into the money printing game. The coming figure presents projections on central bank balance sheets for the European Central Bank (ECB), the Federal Reserve, the BOJ, the Bank of England (BOE), and the People’s Bank of China (PBOC).
What do the pending money supply expansions sum to? For the five central banks shown, through 2021, the BOJ, the BOE, the ECB, the Fed, and the PBOC, may print another $25 trillion (or more). Presuming a global GDP figure of $85 trillion, the additional $25 trillion in money printing sums to 30% of global GDP. Simply amazing.
The Balance Sheets
In looking at how we get to the $25 trillion, the largest projected money printer is the America’s Federal Reserve. By the time 2021 is over, the Federal Reserve may end up printing an additional $11 trillion from where it is now ($6.3 trillion).
Second place belongs to Ms. Lagarde’s ECB. If projections turn out accurate, the ECB will have printed another $7 trillion by the end of 2021 on top of the $6 trillion it has already printed.
The other three “printers” include $5 trillion from the BOJ, $2 trillion out of the PBOC, and $500 billion in action from the BOE. Apparently, it’s a group effort.
The Precious Metals Impact
In the context of the returns of precious metals, another $25 trillion could drive precious metal prices to all-time highs. As of writing, the actions of the central banks and the overall economy, have boosted the price of gold from a middle of March figure of $1,475 to a recent high of $1,700 and silver has risen from $12 in middle March to $15.
So far, the money printing operations of the central banks have had the effect of what one might expect on precious metals – rising prices.
By the time 2021 is through, the top five central banks will likely have printed another $25 trillion to expand their balance sheets. With the economy having bottomed (economy-drive demand for precious metals already accounted for), the risk of rising inflation may drive returns of precious metals to new all-time high in 2021. Could be some amazing years for owners of precious metals.