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A Short History of the Fed Balance Sheet

Originally posted at Capitalstool.

Its all there…plain as day….in the chart of the FED balance sheet.

When did it all start……..

Most say in the bail outs of late 2008…….

But perhaps we should look nearer… early 2018 when the FED tried to do a bit of QT

So softly softly so the market wouldnt notice……..

They propbably thought is was going real swell.

But the hedge funds leveraged into treasuries certainly didnt think so…….

The QT pushed the REPO rate they had to pay on their money up and up and up.

The hedge funds could see their profits disappearing before there very eyes.

Something had to be done about this obviously unacceptable situation.

And so on 17 September 2019….a day that will live forever in financial infamy….

The REPO market printed 10%.

And just like magic a $500 Billion REPO facility was created out of thin air to pour the healing balm on troubled waters.

Was’nt that nice of the FED…..

Even better the virus came along shortly afterwards…. crushed treasury rates and provided the perfect opportunity in April 2020 for the hedge funds to get out of thier leveraged bond positions and into stocks.

Shortly afterwards the FED increased the money supply by 40%…..

And its been up up up and away for the FED balance sheet ever since.

Of course this created a lot of inflation and a lot of very over valued stocks.

So the FED had to throw a few bones to the shorts after February 2021 with all its QT talk…….

Though I find the FED’s tough QT talk unconvincing.

And its transitory inflation meme was just so ridiculous……

Then the FED created that nice Reverse Repo Program so all the hedge funds could hide in a house made out of bricks while the inflationary Wolf huffed and puffed and blew all the bonds and stocks down.

All that FED QT tough talk really helped a lot…..

And that folks is where we are now.

Waiting for the real QT.

But will it be GODOT QT???????????

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