Not unfair from Liesman here:
I can't let the historic absurdity of current monetary policy pass w/out remark: the fed is talking about aggressively reducing its balance sheet while at the same time adding assets to that balance sheet. I think that's the monetary policy equivalent of a dog chasing its tail.
— Steve Liesman (@steveliesman) January 5, 2022
This reminds me of the Fed REDUCING system reserve balances back in 2019 by 50b per month then all of a sudden out if left field just came out one day and said they stopped that…. So here they are today adding 100b per month (they were just in the Tsy market on Tuesday BUYING) then all of sudden they are talking about reversing that?…. In 2019 they were ready to under run their own 10% system RRR requirement and destroy the FF market and (unsuccessfully) tried to stop that….
What is the problem now?
Maybe they think RRP will fail if they raise rates without reducing system reserve balances first?
Everyone will just take their USD savings and go into higher yielding short term USTs instead of RRP at the Fed?
$1.5T of Reserve Assets get instantaneously transferred into Depositories and creates another September 2008 and March 2020 style crash of the whole thing?
SCARY!!!!
What assets are they adding to their balance sheet? What's Lieseman talking about?
ReplyDeleteThey just bought $bazillion on Tuesday….. They are buying another $925M of TIPS today… (btw think about the irony of THE FED buying TIPS but I digress..)
ReplyDeleteLiesman probably thinks they should at least stop buying before they start to talk about selling… which has been the previous policy..
These morons always have worked it like “first in first out”…
iow they lower the rate first then do the QE (to them) … then to reverse they have traditionally first raised rates and THEN think about reserve reduction…
they are apparently changing that process.., already talking about reserve reduction before they have even raised rates..,
Something might be up… these abrupt arbitrary policy changes have usually preceded a major Fed fuck up…
The Fed buying TIPS is a joke. How much they pay does determine the level of humor but a joke nonetheless
ReplyDelete