In the September 7th, 2015 article entitled "How China's cash injections add up to quantitative squeezing," there is a "Quantitative Differing Diagram" halfway through article.  It shows graphs...

In the September 7th, 2015 article entitled "How China's cash injections add up to quantitative squeezing," there is a "Quantitative Differing Diagram" halfway through article.  It shows graphs on these banks: People's Bank of China, US Federal Reserve, Bank of Japan, and European Central Bank.  What does each graph represent and what points is it trying to demonstrate?

Asked on by catnorma

1 Answer | Add Yours

astrocourt's profile pic

astrocourt | College Teacher | (Level 3) Assistant Educator

Posted on

In the article, read the paragraph above and below the graphs for a description of each of the plots.

----------------------------------------------------------

In each graph

The blue line represents the total assets of each bank. Notice that each bank's asset worth is reported in 'trillions' of their native currency. In order to read the value of the blue line, read the blue scale (on left).

So, for example, the US Federal Reserve bank had ~4.5 trillion USD in assets in 2015 and the People's Bank of China had ~10 trillion Yuan in assets in 2006.

Conversely, the red line depicts the amount of central bank-issued money is being created, relative to the size of the economy. In order to ascertain the value of this line, use the red scale (on the right).

----------------------------------------------------------

The article focuses on China. 

Compared to the other banks, the assets of the People's Bank of China have remained pretty steady over the last year - in contrast with claims of qualitative easing (see definition at top of article).

Furthermore, the shapes of the lines in the other three banks is similar - i.e. the red and blue lines jump at the same time. But, the People's Bank of China's assets as a percentage of Chinese GDP has been decreasing since 2010. This doesn't mean that the bank is falling behind - unable to support the economy. Rather it shows that the qualitative (type) of asset management has changed (see last paragraph of article).

Images:
This image has been Flagged as inappropriate Click to unflag
Image (1 of 1)

We’ve answered 318,913 questions. We can answer yours, too.

Ask a question