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The Fed Sings A Sweet Tune – Here’s Why It Will Lead To Market Bitterness

Prior to the onset of QE in 2009, a normal reserve position meant tight reserves. There were virtually no excess reserves on the Fed’s balance sheet. That means that the drains will continue until the balance sheet reaches a tight reserve position. Except that that can’t happen because the markets and the economy would have a really bad accident, first.

So the Fed is now using soothing words to calm the markets. But does that matter? No. It will get a lot worse before it gets better. Here’s what you need to know.

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