The federal reserve is unwinding its balance sheet. As I said here, this is not going to be a head fake. Total assets are back to where they were in mid 2014.
It will be interesting to see how this plays out. There is no historical guide, so to speak, since something of this magnitude has never been done in the history of mankind. The easy part is loading up the balance sheet and buying MBS and treasuries. The hard part is reversing this policy without destroying the economy.
Let me be clear. I think the Federal Reserve is evil and should be abolished. Having said that, I don’t understand why they are doing this. ‘If it’s not broke don’t fix it’ would be my motto. They should just let their securities mature and not reinvest.