The decline of “safe” assets

Presenting the unwanted mutant offspring of the most important chart in the world*…



You’ll find the above on page 143 of the Credit Suisse 2012 Global Outlook, which we’ve stuck in the usual place.

It shows how the world’s outstanding stock of safe haven assets denominated in either dollars or euros has evolved, adjusted to account for the Fed’s purchases of US Treasuries and other assets in recent years as part of quantitative easing.

The chart helps explain much of what’s happening in global financial markets now, especially in Europe (not on its own, mind you — we said “helps” explain):

– Begin with the ongoing collateral crunch, and how the decline of safe assets is directly tied to the dramatic fall in the availability of high-quality collateral in European lending markets. So much of it is now encumbered via direct bilateral funding agreements or by sitting at the central bank drawing liquidity.

http://ftalphaville.ft.com/blog/2011/12/05/778301/the-decline-of-safe-assets/