The balance sheets of major global central banks have ballooned in the past few years as they continue to borrow to keep the economy growing. One of the reasons for the soaring inflation can be attributed to this relentless money printing. The following is a brief excerpt from an interesting piece I came across recently:

So what has caused the big recent spike in inflation?

As much as President Biden would love to call this “Putin’s price hike” and Labour want to call this the “Tory cost of living crisis” the origins are much bigger. How big? How does $24 Trillion bigger sound? Is that big enough?

This chart below is now a little old but the total numbers haven’t really come down yet. The chart below is effectively money printing. To describe this in a very simplified manner the central banks print money and use that to buy government bonds and other assets that it then puts on its balance sheet. The theory is it swaps cash for bonds and subsequently releases the cash into the financial system to be loaned out, paid out as benefits etc, ending up in the consumer or business’s pockets.

Since Alan Greenspan started this economic experiment in 1999 global central banks have convinced themselves that more is better when it comes fixing global economic problems with more cash. And each new problem that has arisen, they have arrived faster and with more stimulus than the previous time. Why? The same reason Roman Abramovich kept changing Chelsea managers. Because it’s worked every time. Until it doesn’t.

Let’s look back at some examples over the past 20 years. In 2008 the global financial system nearly came to a grinding halt and was only saved by the liquidity injection we can see above. Between 2010 and 2015 a number of European countries defaulted (or almost defaulted) on their debt and were only saved because the European Central Bank “did whatever it takes” to save them. Then the Covid crash of March 2020 saw the coordinated global shutdown of the world’s economies – again only saved by an enormous injection of cash into the system.

Time and time again we have hit major financial problems and time and time again printing more money has saved the system with very little consequence – until now.

The consequences of printing more money go back hundreds, almost thousands of years. From Roman emperors shaving the sides off their silver coins to Henry VIII debasing the amount of gold and silver for cheaper metals to the German government of the Weimer Republic printing almost unlimited banknotes, Governments and Kings have found the allure of “free money” too easy resist – and each time has not exactly ended well.

Source: Inflation: The how, why and what next, Permanent Wealth Partners

Update (1/2/23):

1.Central Banks Balance Sheets 2005 to 2021:

Source: Big Balance Sheets Can Mean Big Risks, The Conference Board

2.Central Banks Balance Sheets 2008 to 2021:

Source: Central banks start turning off the cash taps, Reuters

3.Balance Sheet of Central Banks 2006 to 2020:

Source: Bank of France

4.The Chainalysis 2021 Global Crypto Adoption Index:

Source: Why I’m Less Than Infinitely Hostile To Cryptocurrency by Scott Alexander

The top five countries that have the largest uranium resources in 2019 are Australia, Kazakhstan, Canada, Russia and Namibia according to The World Nuclear Association. Russia is estimated to have about 5 percent of the world’s supply.

The following chart shows the world’s top uranium producers in 2021:

Click to enlarge

Source: Russia’s Stranglehold On The World’s Nuclear Power Cycle, Kristyna Foltynova, RFE/RL

We know railroads are the best form of transportation for moving large quantities of certain goods such as agricultural commodities, coal, etc. and other freight such as autos, consumer goods, etc. over long distances cheaply. But I had never thought about how much railroads are fuel efficient. According to AAR, American railroads on an average move 1 ton of freight more than 480 miles per gallon of fuel. This is indeed astonishing. The following infographic puts this figure in perspective:

Click to enlarge

Source: FreightWaves

Related Stocks:

1. Canadian National Railway Co (CNI)
2. Canadian Pacific Railway Ltd(CP)
3. CSX Corp (CSX)
4. Union Pacific(UNP)
5. Norfolk Southern Corp(NSC)

Disclosure: Long CNI, CSX, UNP and NSC

One of the important infrastructure needs of a country are the roads. An excellent road network not only helps people travel from one place to another easily but also facilitates the movement of goods thereby increasing trade and unleashing further economic activities. In many emerging countries of the world, poor roads are a major hindrance to development. On Youtube, there is a fascinating series called The Deadliest Roads. Each episode shows the dangerous roads in a particular country that people use every day for survival. In many of these countries, some people lose their lives or get seriously injured because of poor road conditions.

Mariano Moszoro and Mauricio Soto of IMF recently published a post on The World’s Fastest and Slowest Roads. As expected, the slowest roads in the world are in poorer countries. From the post:

IMF staff have developed a novel measure of road quality across 162 countries using Google Maps to determine the mean, or average, time it takes to drive between large cities that are at least 80 kilometers (50 miles) apart. As the Chart of the Week shows, the world’s fastest roads are found in richer economies including the United States, Portugal, Saudi Arabia and Canada. The slowest roads are found in the poorest countries—another obstacle to inclusive growth. An interactive version of the map can be viewed here.

Source: Where Are the World’s Fastest Roads?, IMF Blog

In Latin America, Chile and Argentina have the fastest roads.