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Fed’s balance sheet $4 trillion and growing

This week the Federal Reserve announced their meager QE3 taper of $10 billion per month and no change to the discount rate.  No surprise if you’ve been reading my articles.

Their balance sheet is over $4 trillion and growing at least $75 billion per month.  Not to worry.  The money was created out of thin air, just a journal entry.  It will most likely never be unwound.  Either held to maturity or written off, sometime in the very very distant future.

The danger of the Fed’s current policy is not hyperinflation, it’s that they may have backed themselves into a corner.  If the US falls back into recession…what can they do?  The discount rate is near zero.  QE has reached the point of diminishing returns.  Wall Street will have lost confidence in the Fed’s ability to shore up the economy.  Panic will be the order of the day.

Invest prudently.