JPMorgan Stunner: ‘The Current Episode Of Excess Liquidity Is The Most Extreme Ever’

JPMorgan Stunner: “The Current Episode Of Excess Liquidity Is The Most Extreme Ever” (ZeroHedge, Sep 8, 2014):

“The ECB’s quantitative expansion is hitting the financial system at a time when broad liquidity is also very high. The rise in excess liquidity, i.e. the residual in the model of Figure 3, is supportive of all assets outside cash, i.e. bonds, equities and real estate. The current episode of excess liquidity, which began in May 2012, appears to have been the most extreme ever in terms of its magnitude and the ECB actions have the potential to make it even more extreme, in our view…. These liquidity boosts are not without risks. We note that they risk creating asset bubbles which when they burst can destroy wealth leading to adverse economic outcomes. Asset yields are mean reverting over long periods of time and thus historically low levels of yields in bonds, equities and real estate are unlikely to be sustained forever.”
– JPMorgan

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