Federal Reserve Balance Sheet Runoff Discussion

We are linking to an article in Bloomberg relative to the Fed Reserve Balance Sheet runoff which we mention each week in the “Monday Morning Kickoff”.  This is important to us as we see the balance sheet as the ‘dry powder’ the Fed needs to manage rocky economic times.

We link this article because the U.S. deficits continue to grow and these borrowing needs, in combination with the balance sheet runoff, will have very substantial affect on economic factors in the future (i.e. interest rates).

Unfortunately we seldom see articles on the deficit and/or balance sheet runoff–it is nice someone is paying attention.

The article can be found here.

8 thoughts on “Federal Reserve Balance Sheet Runoff Discussion”

  1. http://www.usdebtclock.org is my go to site to see how much our government debt is (currently a whopping $21.8 TRILLION). There is also a wealth of other information on the site, youjust have to click around. I again urge everyone reading this is diversify so if one of your investments blows up you can still sleep at night and live without great stress. Wishing you profitable investing, Nomad

    1. Im trying Nomad. Working on one now, but no luck today (or yesterday). But i did get something accomplished today…Ever fixed a 1971 pinball machine that was malfunctioning? When I bought this thing 6 months ago nobody told me there wasnt a Calvary coming to the rescue. Divine intervention occured and I tore into it, fixed it and got back together. A true miracle if you knew how lacking my handyman skills are.

    2. Im trying Nomad. Working on one now, but no luck today (or yesterday). But i did get something accomplished today…Ever fixed a 1971 pinball machine that was malfunctioning? When I bought this thing 6 months ago nobody told me there wasnt a Calvary coming to the rescue. Divine intervention occured and I tore into it, fixed it and got back together. A true miracle if you knew how lacking my handyman skills are.

      1. Grid, I am a HUGE pinball fanatic! I’ve had over 20 different machines, but have always gotten a pin technician when they malfunctioned. Which game do you have? I’m partial to older machines and use to collect wood rails, sadly I don’t have any right now. I’m heading to Vegas in late December and have been told there is a great Pinball Hall Of Fame at the Tropicana.
        I picked up a bit of KMPA and LANDP today and am hoping there is some nice tax loss selling in Dexember so I can pick up more bargains.

        1. It is a Gottlieb Lawman 2 player (Sheriff is the 4 player) from 1971. Had to disassemble a scoring wheel on back and fix it as scoring wasnt working correctly. Then I had to resolder a joint because I broke it. ….I am almost beginning to wonder if rate hike mania is almost done and its time to go long from sell off instead of being overly focused on short term issues.

          1. President Trump is definitely putting pressure on Fed Chair Jerome Powell to stop raising rates and pulling on the reins/putting pressure on the US economy. If you look at many other countries rates after the US 10 Year is 3.0626%; rates here on this side of the globe are “high”…
            Major 10Y Yield Day Weekly Monthly Yearly Date
            Australia 2.63 0.00 0.00% -0.07% 0.06% 0.14% Nov/28
            Brazil 10.13 0.01 0.01% -0.03% -0.27% -0.18% Nov/28
            Canada 2.32 0.00 0.00% -0.03% -0.08% 0.44% Nov/28
            France 0.73 0.01 0.01% -0.04% -0.02% 0.02% Nov/28
            Germany 0.35 0.00 0.00% -0.03% -0.03% -0.04% Nov/28
            Greece 4.34 0.03 -0.03% -0.83% -0.51% -0.93% Nov/28
            India 7.64 0.09 -0.09% -0.07% -0.17% 0.62% Nov/28
            Italy 3.26 0.04 -0.04% -0.22% -0.08% 1.47% Nov/28
            Japan 0.1020 0.00 0.00% 0.01% -0.01% 0.07% Nov/28
            Mexico 9.22 0.05 -0.05% 0.05% 0.49% 1.95% Nov/28
            Netherlands 0.49 0.00 0.00% -0.04% -0.03% 0.00% Nov/28
            New Zealand 2.65 0.00 0.00% -0.10% 0.10% -0.11% Nov/28
            Portugal 1.88 0.01 -0.01% -0.10% 0.00% -0.05% Nov/28
            Spain 1.55 0.01 -0.01% -0.09% -0.01% 0.06% Nov/28
            Switzerland -0.07 0.02 -0.02% -0.03% -0.05% 0.03% Nov/27
            UK 1.38 0.00 0.00% -0.02% -0.02% -0.01% Nov/28

  2. If you look at how we got to where we did with Fed Policy, first we cut rates then we did asset purchases as a 2nd action. This is part of the reason, I don’t like what the Fed is doing. Getting rates higher WITHOUT winding down the Fed Reserve Balance sheet first is jumping the gun.

    Now, I understand we cannot do this orderly, the fed’s prime is inflation and unemployment. So, the Fed needs to raise rates WHILE doing the runoff. I will never understand, Jay Powell’s statements that we (1) may overshoot neutral, (2) are far from neutral, and (3) the approved dot plot forecast. These are aggressive, hawkish actions. The fed needs to be data driven only. It took us 9-10 years to get to moving back to normal. The rush to normalize is in my opinion – over zealous. He needs to not be “macho Jay” and start to back off his statements. Today would be a good time. Yeah – I read “he cannot” due to POTUS comments. I say – baloney that would be politics. Let’s stick to economies. The fed needs to be data driven

    1. Personally, I think this “Fed Runoff” is a ruse. It will never drop below a couple trillion. This debt is being monetized. That will be the next trick if budget deficit soars and rates rise…. The Fed will help buy it up and monetize it. The band will play on….

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