Saturday, July 27, 2013

More Thoughts on the FED's Balance Sheet

The above is the FED's Assets as of July 26, 2013. Still ramping up and for some serious reasons. Let us take a look at the most significant elements below:
Clearly we have really only two to deal with so let's look at them. Namely the Treasury holdings and the Mortgage Backed Securities.
This shows that the FED continues to buy tons of this stuff now amounting to over $4 trillion. This is the most significant part of the Asset Base. Now when this starts to unwind we will have significant problems. The new FED Chair should be asked what to do about this mess. Are we to stop it and if so when do we unwind it and at what cost.

This will be the challenge for the next decade!