Tag: money supply

The Fed’s Balance Sheet Reduction (QT) Update<span class="badge-status" style="background:red">Premium</span> 

The Fed’s Balance Sheet Reduction (QT) UpdatePremium 

The Fed slightly reduced its T-Bill holdings this week. That was the extent of its QT effort. Meanwhile, crypto lender Silvergate went down for the count earlier this week. In addition, Silicon Valley Bank (ticker: SIVB) lost 60% of its market value on Thursday and is off another 22% in the aftermarket as Tech VC … Continue reading The Fed’s Balance Sheet Reduction (QT) UpdatePremium 

The Fed’s Balance Sheet Reduction (QT) Update

The Fed’s Balance Sheet Reduction (QT) Update

The Fed essentially did nothing this past week in terms of tightening the money supply. QT hasn't been nearly as aggressive as the Fed's QE efforts - especially when you consider the cumulative effect of QE from 2009-early 2022. This Fed's ideology is not aligned with getting CPI down to 2% as I wrote back … Continue reading The Fed’s Balance Sheet Reduction (QT) Update

The Fed’s Balance Sheet Reduction (QT) Update

The Fed’s Balance Sheet Reduction (QT) Update

The Fed continued to modestly tighten monetary policy this week with a modest Treasury holding reduction of $32 billion. The Fed is approaching neutral monetary policy at this juncture but is not quite there. For commentators to suggest that Fed policy is restrictive is hogwash. Recall that CPI is still north of 6% (higher in … Continue reading The Fed’s Balance Sheet Reduction (QT) Update

Tomorrow’s CPI = Noise

Tomorrow’s CPI = Noise

Regardless of where CPI lands tomorrow, my view is that the Fed will hold rates higher for longer than the market believes. Higher interest rates combined with a shrinking money supply (QT), translates to: tighter monetary conditions, a higher cost of capital, less revenue visibility for companies, more employee layoffs and a deeper recession. The … Continue reading Tomorrow’s CPI = Noise

The Fed’s Balance Sheet Reduction (QT) Update

The Fed’s Balance Sheet Reduction (QT) Update

The Fed's balance sheet was essentially unchanged over the week-ended January 11th. Treasuries: The Fed’s Treasury security holdings were $1.2 billion lower over the last week and $58.2 billion lower on a rolling 4-week total basis. Agencies: The Fed’s Government Agency security holdings were unchanged over the last week and $17.2 billion lower on a … Continue reading The Fed’s Balance Sheet Reduction (QT) Update

Money Is Tight. Perhaps Too Tight.

Money Is Tight. Perhaps Too Tight.

Money is tight when we observe the monetary base (currency in circulation plus reserves). It is dangerous to shrink the monetary base at the pace in which we have done so as interest rates rise. Doing so could be the difference between an economic recession and a depression. One can see based on the first … Continue reading Money Is Tight. Perhaps Too Tight.

The Fed’s Quest To Regain Credibility

The Fed’s Quest To Regain Credibility

The Fed's tightening is as much about its quest to regain credibility as it is about curbing inflation. The fact that prices for goods and services started to climb in 2020 and have persisted higher for two years is no surprise. The Treasury (subsidized by the Federal Reserve) mailed trillions of freshly-printed U.S. Dollars (helicopter … Continue reading The Fed’s Quest To Regain Credibility