By the end of the year the Fed will have withdrawn $450 billion from the banking system if it sticks to its published schedule. The annual bloodletting will then plateau at $600 billion per year until the balance sheet reaches a tight reserve position. We have seen the effects in the money markets and we’re starting to see them again in stocks. It will only get worse.
Here are a few particulars from the Fed’s weekly balance sheet and weekly consolidated banking system balance sheet that illustrate where we are and where we’re headed.
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