Are Central Banks Nationalizing the Economy?

Despite the Fed's tightening, central banks remain firmly in control of markets

The First Bank of the United States in Philadelphia in 1939. Library of Congress

In rough numbers and at the end of 2017, leading central banks now own a fifth of their governments’ total debt.

The figures are staggering. Without recession or crisis, major central banks have been purchasing more than $200 billion a month in government and private debt, led by the European Central Bank (ECB) and the Bank of Japan (BoJ) as the Federal Reserve (Fed) has been starting to take a break. Nevertheless:

• The Fed owns 12.4 percent of the U.S. total public debt.
• The ECB and BoJ balance sheets exceed 35 percent and 70 percent of GDP.
• The BoJ is now a top 10 shareholder in 90 percent of the Nikkei.
• The ECB owns 9.2 percent of the European corporate bond market and more than 10 percent of the main European countries’ total sovereign debt.
• The Bank of England owns between 25 percent and 30 percent of the UK’s sovereign debt.
• The Swiss National Bank owns $3 billion worth of Apple stock.

The BoJ, with its ultra-expansionary policy, is on course to become the largest shareholder of each and every one of the Nikkei 225’s companies. In fact, the Japanese central bank already owns 60 percent of the ETF (exchange-traded funds) market in Japan.