• Markets
  • Crypto
  • Web3
  • Culture
  • Opinion
  • Politics
Subscribe
  • Login
  • Register
No Result
View All Result
  • Markets
  • Crypto
  • Web3
  • Culture
  • Opinion
  • Politics
No Result
View All Result
No Result
View All Result

Fed Burns Half a Trillion

31/01/2023 11:43
No comments
Fed's balance sheet, Jan 2023

Fed's balance sheet, Jan 2023

The Federal Reserve Banks have reduced their total assets by half a trillion since April, down from $8.96 trillion to $8.47 trillion.

That’s the biggest contraction ever in absolute terms, but percentage wise the 5.5% reduction is the biggest since 2018.

Back then Fed reduced their balance sheet from $4.38 trillion in April 2018 to $4 trillion in January 2019, a close to 10% contraction.

Fed is currently selling $95 billion worth of assets a month, mostly Treasuries but also corporate bonds.

“If the Fed’s balance sheet continues to shrink at its current rate, it will drop by more than 13% this year” says Meetkumar Patel of Cheddar Flow, a data company.

Just how long Fed can keep that up is unclear as ten year Treasury yields have risen to 3.5% following some liquidity crunches last year.

That has contributed to a debate over the debt ceiling, with the Biden administration stating they will not prioritize interest rate payments if the debt ceiling is not raised.

That means the US would default, something markets consider unlikely but this Fed balance sheet reduction is having ripple effects.

In prior Fed board meetings there have been no indications whatever that they plan to slow down, with Fed keeping up the pace in 2018 until August 2019.

That coincides with current speculations of a change of course this summer, yet the 2019 change of direction was in part due to significant pressure from the then US president Donald Trump who even threatened to fire Fed’s chair Jerome Powell.

The current president Joe Biden is unlikely to get involved in any such spat, and has actually not made any comment whatever regarding Fed policy.

If Fed will continue this time beyond summer is therefore unclear, with it engaging in aggressive monetary tightening in 2018 despite inflation back then being very under control at 2%-3%.

Currently it is running at 6.5% for December, though most expect it to fall much further especially as gas prices have crashed with such energy costs being the main contributor to the spike in inflation.

Fed is now to meet tomorrow to further decide policy. Markets expect a hike of 0.25%, but some might look to read the tea leafs in regards to the tone of the speech.

The European Central Bank and the Bank of England will also decide on interest rates this week, with all engaging in monetary tightening.

That means they’re burning money that they created from nothing by selling assets, which in this case are loans, with the act of selling being a ‘repayment,’ thus the capital is no longer money as such.

Through this process they manipulate prices, and right now they’re manipulating towards deflation, with it anyone’s guess whether they will then be able to manage that deflation as they have been unable to for the past 15 years.

Related Posts

Arbitrum opening price, March 2023

Arbitrum Gifts $1.7 Billion to the Public

Bitcoin art, March 2023

Stocks Jump 2%, Bitcoin Close to Touching $29,000

Coinbase Dives 15%

Goldman Sachs and JP Morgan Can’t Survive Bank Run Says NBER Paper, Fail Stress Test

Load More
  • Trending
  • Comments
  • Latest
The National Bureau of Economic Research

Goldman Sachs and JP Morgan Can’t Survive Bank Run Says NBER Paper, Fail Stress Test

Paul Grewal, Coinbase's Chief Legal Officer

We Asked SEC to Register, They Sent Us a Wells Notice Says Coinbase

NY District Court

XRP Hypes Ahead of Court Decision

Bitcoin and asset prices dive, March 2023

Bitcoin and Stocks Dip on Fed Hikes, But is it a Fakeout?

Arbitrum opening price, March 2023

Arbitrum Gifts $1.7 Billion to the Public

Bitcoin art, March 2023

Stocks Jump 2%, Bitcoin Close to Touching $29,000

Brian Armstrong getting ready for court. The words are a joke, but the picture is him for real, March 2023

Coinbase Dives 15%

The National Bureau of Economic Research

Goldman Sachs and JP Morgan Can’t Survive Bank Run Says NBER Paper, Fail Stress Test

Comments

Latest News

  • Arbitrum Gifts $1.7 Billion to the Public
  • Stocks Jump 2%, Bitcoin Close to Touching $29,000
  • Coinbase Dives 15%

About Trustnodes

Terms of Service

Privacy Policy

Our Ethics and Values

Trustnodes Newsletter

(You have to be a paid subscriber)

Trustnodes © 2017-2023. All Rights Fully Reserved. For any Enquiries contact@trustnodes.com RSS Feed

No Result
View All Result
  • Login
  • Sign Up
  • Cart
  • Markets
  • Crypto
  • Web3
  • Culture
  • Opinion
  • Politics

Trustnodes © 2017-2023. All Rights Fully Reserved. For any Enquiries contact@trustnodes.com RSS Feed

Welcome Back!

Login to your account below

Authenticate with MetaMask Loading...

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

*By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?