So here's what's happening for anyone who wants more context. The US Treasury issues debt (called Treasuries) to fund US government operations. The US Treasur

So here's what's happening for anyone who wants more context. The US Treasury issues debt (called Treasuries) to fund US government operations. The US Treasury is a 'traditional' part of the US government and its debt is considered as close to 'risk-free' as you can get today (some combination of the US government's ability to indefinitely tax the largest/most advanced economy in the world + the US military are the two things cited as to why this is true). The US Fed is a less traditional part of the US Government. It is technically a bank that the government owns, but voters have no direct means of influencing policy. Previously, The Fed would 'manage' the behavior of private banks by either controlling the money supply (an increasingly abstract concept in the age of digital money) or adjusting the super short-term interest rate at which it loans money to banks who need it in a pinch (increasingly less relevant for a variety of factors). They actually transacted very little with the Treasury in this period. In 2008, The Fed found that neither of their tried and true tools was good enough to get private banks to lend more money than they were doing at the time (you'll hear a lot of hand-wringing about the 0 lower bound of interest rates, despite some interesting outcomes from negative interest rates in other countries). In order to do something, the Fed decided to just straight up buy US Treasuries (something Japan had pioneered before; they also buy Mortgage-backed Securities, but don't worry about that right now). This decision (known as Quantitative Easing because economists love to pretend like they're scientists) has the net effect of making the Treasuries more expensive, and their interest rates lower. This is because Treasuries are sold with a fixed coupon rate (i.e. I'll give the owner of this Treasury $5/month) and a floating face value (i.e. I'll pay a variable amount of money depending on current risk conditions to own the Treasury that pays me $5/month risk-fee). When the risk-free interest rate is low, people tend to look to riskier places to generate yield, and therefore lend money more liberally. This change is important because it went from the Fed influencing a relatively esoteric, bank-only interest rate to the Fed controlling the most important interest rate in the world (it's one of the most common baselines used for determining other interest rates). Long story short, The Fed wants that interest rate to go back up, so what are they doing? They are no longer buying new Treasuries to replace their existing Treasuries that reach maturity, to the tune of $90bn per month Is that removing liquidity? Not really, it's just decreasing the active injection of liquidity that the Fed has been doing for the past 15 years. Does the nominal amount of money on the Fed's balance sheet matter/should we strive to bring it to $0? Unclear - what does it even mean for the US government to own its own debt? As long as markets don't care (they seem to not care right now out of convenience) then it's all fine, I guess? Will the Fed ever actively sell its Treasury holdings? Probably not, because they are happy with the tense equilibrium I mentioned above and they don't want to risk breaking that. What's the best KPI to watch? As long as new Treasuries sell (at auction) at around the Fed's desired interest rate, this is a non-problem and we can sort of ignore it. As soon as the Treasury market breaks (A lot of varying opinions here), then this is the world's biggest problem ever and we will look back at how foolish we were (just unclear if that will ever happen).