Amidst the talk of the Fed potentially tightening monetary policy in 2023 or even next year, the Fed expanded its Balance Sheet at its fastest pace since March 17th of this year, growing assets 1.4% from the week prior.
This narrative of the Fed potentially becoming more hawkish needs to be put into perspective. With the Fed Funds Rate at a 0.00-0.25% range, how high do we believe interest rates could potentially go given the National Debt is approaching $30 Trillion and that the Federal Government plans to run fiscal deficits in perpetuity? This monetary policy fever dream requires a reset, but Jerome Powell is not the person to do it. As we have written before, a new Fed Chair – Volker 2.0 – will be required to dramatically lift interest rates once this inflation/debt/asset bubble blows up completely. I’m not smart enough to know when that blow-up will occur, but the ultra-loose, debt-driven fiscal and monetary policies of the past 14 months are making things worse economically, not better. Below is the Fed’s Balance Sheet in chart format. To access the Fed’s Balance Sheet in PDF format – including the percentage change in Assets by week – Click HERE.