Now that rescue cycle is deemed over, the Federal Reserve has decided to reverse the QE, to get its assets and liabilities downsized. From a QE high of $4.5 trillion they have shrunk the balance sheet down to $4.1 trillion.
It is no coincidence that this process started in earnest this January and coincides with the U.S. stock markets going into cardiac arrest or at least changing its never-ending upward trend into a serious of vicious slumps and rallies.
The rest of the world who have bathed in cheap dollar finance are especially suffering from this credit ‘cold turkey’ and markets and economies all over the world are suffering the beginnings of an economic winter.
Now the danger is reverse-QE will crash the markets and crush the global economy and the Federal Reserve is not stupid. You can see the $80 billion stated number as about equivalent to the level of economic growth in the U.S. economy.
It’s a number that could strike a balance between liquidity withdrawn and liquidity generated. As such, reverse-QE might not break the system.
But fear and worry can take the system down. Just a thought.
The rest of the world who have bathed in cheap dollar finance are especially suffering from this credit ‘cold turkey’ and markets and economies all over the world are suffering the beginnings of an economic winter.
Now the danger is reverse-QE will crash the markets and crush the global economy and the Federal Reserve is not stupid. You can see the $80 billion stated number as about equivalent to the level of economic growth in the U.S. economy.
It’s a number that could strike a balance between liquidity withdrawn and liquidity generated. As such, reverse-QE might not break the system.
But fear and worry can take the system down. Just a thought.
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