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Central banks appear to compete over having the largest balance sheet in the world. Past month, the European Central Bank (ECB) had the dubious honor of breaking its own previous high. The ECB crossed the €3,130 billion-mark in total assets. In June alone, the central bank grew its balance sheet another €53 billion.

But the ECB is running into its limits. Last year, I raised the possibility that the ECB’s stimulus program might end prematurely. There are simply not enough eligible government bonds for the ECB to purchase. So I concluded that “the ECB has no other choice than extending its purchases to other assets than government bonds, with all the (political) consequences this would entail.” In March, ECB-chairman Mario Draghi reached the same conclusion. He announced that the ECB would also begin purchasing corporate debt. But that does not help the ECB from getting dangerously close to derailing itself and losing complete creditability.

Central Banks Are Not Almighty

Ironically, There Is Not Enough Eligible Government Debt for ECB’s Purchase Program

The ECB’s Adventure in Europe’s Corporate Bond Market Will End Badly

Further Interest Rate Cuts Inevitable

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