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The problem is that we're not leaving ourselves options for when things inevitably go bad. We need to unwind the balance sheet while it's possible, because othe

The problem is that we're not leaving ourselves options for when things inevitably go bad. We need to unwind the balance sheet while it's possible, because otherwise we won't be able to deal with another 2008 the way we did.

nostromo 7y ago
The balance sheet is (slowly) normalizing though. It's being reduced by about half a trillion a year, and that program will continue, regardless of interest rate changes. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
- existencebox 7y ago
  This is incorrect. The fed announced a halt of their divestment when signs of instability began showing over the end of '18 into '19. [0] (Edit: I wanted to reconcile why your chart was still trending down; the halt starts in September. [2]) The lowering of rates now coupled with balance sheet stabilization, during the longest expansion, prior to any REAL sign of economic turmoil (backed by Powell's own statements earlier this year when he was advocating "patience", the fundamentals have not changed substantially since then although his tune has) is to many a bad sign that the fed is being driven by political/wall street forces to keep the party going despite losing leverage down the road and promoting asset inflation. (Housing is often discussed but to avoid the inevitable rebuttals to that, I'd also cite the average PE ratio [1] being far above the historical average.) [0]https://www.reuters.com/article/us-usa-fed-powell/fed-to-stop-shrinking-portfolio-this-year-powell-says-idUSKCN1QG21I https://www.reuters.com/article/us-usa-fed-powell/fed-to-sto... [1] https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio [2] https://www.reuters.com/article/us-usa-fed-balancesheet/fed-announces-plan-to-end-balance-sheet-runoff-in-september-idUSKCN1R12QA https://www.reuters.com/article/us-usa-fed-balancesheet/fed-...

nostromo 7y ago

The balance sheet is (slowly) normalizing though. It's being reduced by about half a trillion a year, and that program will continue, regardless of interest rate changes. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

existencebox 7y ago
This is incorrect. The fed announced a halt of their divestment when signs of instability began showing over the end of '18 into '19. [0] (Edit: I wanted to reconcile why your chart was still trending down; the halt starts in September. [2]) The lowering of rates now coupled with balance sheet stabilization, during the longest expansion, prior to any REAL sign of economic turmoil (backed by Powell's own statements earlier this year when he was advocating "patience", the fundamentals have not changed substantially since then although his tune has) is to many a bad sign that the fed is being driven by political/wall street forces to keep the party going despite losing leverage down the road and promoting asset inflation. (Housing is often discussed but to avoid the inevitable rebuttals to that, I'd also cite the average PE ratio [1] being far above the historical average.) [0]https://www.reuters.com/article/us-usa-fed-powell/fed-to-stop-shrinking-portfolio-this-year-powell-says-idUSKCN1QG21I https://www.reuters.com/article/us-usa-fed-powell/fed-to-sto... [1] https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio [2] https://www.reuters.com/article/us-usa-fed-balancesheet/fed-announces-plan-to-end-balance-sheet-runoff-in-september-idUSKCN1R12QA https://www.reuters.com/article/us-usa-fed-balancesheet/fed-...