2025-006. Assets growth and monetary creation.L.Béduneau FR

1Introduction

Since1945,theglobaleconomyhasbeenmarkedbyasignificantexpansion ofthemoneysupply,primarilydrivenbycentralbanksrepresentingapproximately90%oftheglobalmoneysupply,includingtheFederalReserve(Fed),the EuropeanCentralBank(ECB),theBankofJapan(BoJ),thePeople’sBankofChina (PBoC),theBankofRussia,andotherssuchastheBankofEngland(BoE)andthe SwissNationalBank(SNB).Thisexpansionhasinfluencedthevaluationoffinancialandrealassets.Thecentralquestionofthisstudyis: Whichassethasgrown themostsince1945afterremovingtheimpactofmoneycreation?

Thestudyisstructuredinfourparts.Section2analyzestheevolutionofthe globalmoneysupply(M3)since1945.Section 3 calculatestheexcessmonetary growthrelativetoglobaleconomicgrowth.Section4adjuststhereturnsofmajor assetclasses(stocks,bonds,realestate,commodities)forthisexcess.Section 5 identifiesthetwomostperformingassetclassesandexaminesthefivemost andleastperformingspecificassetsbetween1945and2024.Asummaryand conclusion,followedbylimitationsandappendices,completetheanalysis.

2AnalysisoftheEvolutionoftheGlobalMoneySup-

plySince1945

2.1Methodology

Thissectionexaminestheevolutionofthemoneysupply(M3,includingfiatcurrency,bankdeposits,andnegotiabledebtsecurities)ofcentralbanksrepresenting90%oftheglobalmoneysupply.ThemaininstitutionsincludetheFed,ECB, BoJ,PBoC,BankofRussia,BoE,andSNB.Dataaresourcedfromofficialreportsof thesecentralbanks[2,4,3,5,6,7]andtheWorldBank[8]forglobalaggregates. AverageannualM3growthratesareestimatedfor1945–2024,withadjustments forperiodsbefore1970wheredataareincomplete,usingestimatesbasedon historicalsources[15].

2.2Results

Table1presentstheaverageannualM3growthratesforthemaincentralbanks over1945–2024.

Theglobalmoneysupply(M3)hasgrownatanaveragerateof7.0%peryear. ThePBoCshowsthehighestrate(9.1%),reflectingthefinancingofChina’seconomicgrowthanditspositionasaglobalproductionhub.TheBankofRussia, with8.3%,experiencedsignificantexpansion,particularlybetween1991and 2000,duetopost-Sovieteconomicinstability[6].Japan(7.2%)pursuedanexpansionarymonetarypolicy,notablythroughquantitativeeasingpost-1990[3]. TheFed(6.8%)reflectstheUnitedStates’economicgrowthandthedollar’srole

ininternationaltrade[2].TheECB(5.9%)showsmoremoderategrowth,marked bypost-2008policies[4].

3.1Methodology

Toassesstheexcessofmoneycreation,wecomparethegrowthrateoftheglobal moneysupply(M3)tothegrowthrateofglobalGDP(inrealterms)over1945–2024.GlobalGDPisestimatedfromIMF[9]andWorldBank[8]data,withadjustmentsforpre-1970periodsbasedon[15].Themonetarysurplusiscalculatedas follows:

Thesurplusisexpressedinpercentagepointsandasapercentagerelative toGDPgrowthtomeasuredependenceonexcessmoneycreation.Aweighted globalaverageisestablishedtoadjustassetreturnsinSection4.

3.2Results

Table 2 comparesrealGDPgrowthandthemonetarysurplus,referencingthe M3growthratesfromTable1.

GlobalrealGDPgrowthisestimatedat3.5%peryear,comparedto7.0%for M3(Table1),resultinginanaveragemonetarysurplusof3.5percentagepoints peryear,equivalentto100.0%ofglobalGDPgrowth.Russiashowsthehighest relativesurplus(176.7%),reflectingstrongdependenceonmoneycreationpost1991[6].TheUnitedStates(119.4%)andtheEurozone(110.7%)alsoshowsignificantdependence,whileChina(46.8%)benefitsfromrobusteconomicgrowth, reducingtherelativesurplusshare

Table2: EconomicGrowthandMonetarySurplus(1945–2024)

4AdjustmentofAssetClassReturns

4.1Methodology

Weanalyzethenominalreturnsofmajorassetclasses(stocks,bonds,realestate,commodities)over1945–2024,usingrepresentativeindices:S&P500forUS stocks[11],10-yearUSTreasurybonds[14],Case-ShillerindexforUSrealestate[12],andCRBindexforcommodities[13].Nominalreturnsareadjustedby subtractingtheglobalmonetarysurplusof3.5percentagepoints,calculatedin Section??.Theformulais:

4.2Results

Table 3 presentsthenominalreturns,themonetarysurplusasapercentageof thenominalreturn,andtheadjustedreturns.Theglobalmonetarysurplusis setat3.5percentagepoints,asestablishedinSection??.

Table3: AverageAnnualReturnsofAssetClasses(1945–2024)

4.3Analysis

Theassetclassmostinfluencedbythemoneysupplyisbonds,withanominalreturnof4.5%,ofwhich77.8%isattributedtothemonetarysurplusof3.5percentagepoints(Section ??),leavinganadjustedreturnofonly1.0%.Thisindicates

strongdependenceonmonetaryexpansion,asalargeportionofitsperformance isabsorbedbythesurplus.Incontrast,stocks(S&P500)createdthemostreal value,withanominalreturnof10.2%,ofwhichonly34.3%isattributedtothe surplus,resultinginanadjustedreturnof6.7%.Realestate(Case-Shiller)shows intermediateperformance,withanominalreturnof8.1%,ofwhich43.2%is linkedtothesurplus,leavinganadjustedreturnof4.6%.Commodities,witha nominalreturnof5.3%,ofwhich66.0%isattributedtothesurplus,showalimitedadjustedreturnof1.8%,reflectingtheirsensitivitytoinflationinducedby excessmoneycreation.

5AnalysisoftheMostandLeastPerformingSpecificAssets

5.1Methodology

Weselectthetwomostperformingassetclasses(stocksandrealestate,seeSection 4.2)andidentify,withintheseclasses,thefivemostperformingandfive leastperformingspecificassetsover1945–2024.Forstocks,weanalyzeindividualperformancebymarketcapitalizationintheS&P500[11].Forrealestate,we examinemajormetropolitanareasusingdatafromtheCase-Shillerindexand otherrealestatereports[12,16].Adjustedreturnsarecalculatedbysubtracting theglobalmonetarysurplusof3.5percentagepoints,asdeterminedinSection ??.

5.2Results:MostPerformingAssets

Table4liststhefivemostperformingspecificassets,withthemonetarysurplus expressedasapercentageofthenominalreturn.

Table4: FiveMostPerformingSpecificAssets(1945–2024)

Returnsareadjustedbysubtractingtheglobalmonetarysurplusof3.5percentagepoints,calculatedinSection ??.Forexample,forApple,thesurplusof 3.5represents23.0%ofthenominalreturnof15.2%,indicatingmoderatedependenceonexcessmoneycreation.

5.3Results:LeastPerformingAssets

Table5liststhefiveleastperformingspecificassetsinthestockandrealestate classes,withthemonetarysurplusexpressedasapercentageofthenominal return.

Table5: FiveLeastPerformingSpecificAssets(1945–2024)

Returnsareadjustedbysubtractingtheglobalmonetarysurplusof3.5percentagepoints,calculatedinSection ??.Forassetswithnegativenominalreturns(e.g.,Sears:-2.5%),themonetarysurplusexacerbatestheloss,representing-140.0%ofthenominalreturn,indicatingthatexcessmoneycreationamplifiesthenegativeimpact.

5.4Discussion

Technologicalstocks(Apple,Microsoft)dominateduetoinnovation,withmoderatedependenceonthemonetarysurplus(23.0–29.9%ofnominalreturn).Real estateinmetropolitanareas(SanFrancisco,London)benefitsfromurbanization,withslightlyhigherdependence(36.8–41.2%).Conversely,stocksofcompanieslikeSearsandKodakhavedeclinedduetotheobsolescenceoftheirbusiness modelsinthefaceofdigitalization,withlossesamplifiedbythemonetarysurplus.RealestateinindustrialcitieslikeDetroithassufferedfromeconomicdeclineanddeurbanization,withhighdependenceonthesurplus(125.0–233.3%).

6SummaryandConclusion

Stocksandresidentialrealestatestandoutasthemostperformingassetclasses over1945–2024afteradjustingforthemonetarysurplusof3.5percentagepoints (Section 4.2).Technologicalstocks(Apple,Microsoft)andrealestateinmajor metropolitanareas(SanFrancisco,London)showthehighestadjustedreturns, withmoderatedependenceonexcessmoneycreation(Section 5).Conversely, stockslikeSearsandrealestateincitieslikeDetroithavesignificantlydeclined, withlossesexacerbatedbythemonetarysurplus.Theseresultsreflecttheimpactofexcessmoneycreation(Section3)andeconomicdynamicssuchastechnologicalinnovation,urbanization,andindustrialdecline.Inconclusion,adjustingforthemonetarysurplusisolatesrealvaluecreation,highlightingthe resilienceoftechnologicalstocksandmetropolitanrealestate.

7LimitationsoftheStudy

• HistoricalData:M3andGDPdatabefore1970areestimated,whichmay introducebiases[15].

• VariableDefinitions:Monetaryaggregates(M3)varybyregion,affecting comparability[8].

• Speculation:Returnsoftechnologicalstocksincludeaspeculativecomponentthatisdifficulttoadjust[11].

8Appendices

8.1DetailedCalculations

Adjustedreturnsarecalculatedasfollows:

= NominalReturn 3.5% ExampleforApple: 15 2% 3 5% =11 7%.Themonetarysurplusasapercentage ofthenominalreturniscalculatedas: 3.5

23 0%.

8.2MethodologyExplanation

Dataareannualizedover1945–2024.Nominalreturnsarederivedfromstock indices[11]andrealestateindices[12,16],adjustedbytheglobalmonetarysurplusof3.5%.Specificassetsareselectedbasedontheirmarketcapitalizationor realestatevalueinmajormetropolitanareas.

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