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Since the start of February this year, the Fed has expanded its balancesheet by more than $2.4 To put that in context, the Fed was created in 1913, and its total balancesheet assets only reached $2.4 trillion in assets, but only 2 months to achieve the same amount of balancesheet expansion this year.
Here''s an interesting video from the recent James Grant Conference. Note: you may have to click on the play arrow twice to start the video. Note: you may have to click on the play arrow twice to start the video. From this perspective of the bond market, Europe has become Japan.
Having already cut interest rates to record lows and saying they can go no lower, Draghi is now focused on boosting the ECB’s balancesheet. We are quite confident that the impact on our balancesheet size will be adequate, will be significant, will be sizable,” Draghi said. trillion] more than the current level.
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Despite the unprecedented increase in the Federal Reserve’s balancesheet, growth in M2 over the first nine months of this year fell below its average rate of growth over the past 115 years, a time when the growth in the monetary base was stable and quite modest. Please play the following video for a big laugh. So which is it?
If the Fed were to pull back, if it was to taper and eventually stop buying bonds, it's not only the absence of Fed buying that would crush the market, private buyers, particularly the leveraged speculators, why would anybody buy a 10-year treasury yielding what, 2.8%, or even a 30-year treasury at 3.9%, why would you do that?"
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That would shrink the tradable market for German bonds in a year when the debt agency already planned to reduce the amount of conventional bonds outstanding by 8 billion euros. We might not be too far off the German bund market looking like the Swiss one, with a negative yield out to 10 years. It’s pretty crazy.”
ECB Hints at March Stimulus ECB president Mario Draghi ignited the markets today with Hints at More Stimulus in March. Investors reacted positively to Mr. Draghi’s comments Thursday, with eurozone equity markets moving higher in anticipation of further stimulus from the central bank. I position the video at that spot.
Without paying banks interest to hold excess reserves idle in the banking system, the Fed could reduce its balancesheet by more than one-third (over $1.4 So it simply acts as a hot potato, encouraging yield-seeking speculation in the financial markets. Notice something.
With its balancesheet totalling nearly 1.6 Either way, it’s an unorthodox choice that has distorted financial markets and triggered warnings that the strategy could backfire. Economic Distortions That's actually a balanced synopsis by Bloomberg as far as it went. Link if video does not play: Crazy - Patsy Cline.
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Bernanke also made the case in his presentation for keeping the Fed’s balancesheet big in the aftermath of the financial crisis. [Is Most other major central banks have permanently large balancesheets and are able to implement monetary policy without problems,” he said. [And pray tell, what credibility is that?]
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