The federal reserve has begun to expand its balance sheet for the first time since the end of 2014.
It is loading up on treasury bills, but it is still selling MBS.
The more I hear the FOMC members talk, the more I think they are total clueless about what they are doing. All of these new “tools” they have made since 2008 and all of this balance sheet tinkering and changes risk blowing the economy sky high.
Money supply growth is at risk of climbing to double digits in the next few months which is a rare event in the US. One issue with elevated money supply growth and credit growth is that if it is not pulled back price inflation can spike rapidly. The other issue is shrinking it without causing a recession. All of this tinkering is reminiscent of Dr. Bernanke’s mad monetary operations leading up to the 08 crisis. Sometimes it is hard to tell if they are clueless or disingenuous. This is how I will always remember Dr. Bernanke.