Question for Sig (or anyone else) - where do you suppose (not an exact target, ballpark) rates would be currently if The Fed didn't do all their QE magic? My uneducated guess, 10 year north of 4%, likely at least 5% maybe even 6%. If that were to suddenly be the case aaaaaaaaaaaa lot less money today would be floating and "bubbling" around chasing goods and services .... and stocks.
So you have nothing better to counter with and give an opinion on how the fed alters the trajectory of their balance sheet in a way that is sustainable given the growth rate of the economy. Instead you choose to deduce this to politics? I digress.
No, you dissemble and fail to answer the simple question I asked because the answer doesn't paint your sudden concern about this in a favorable light, does it? Let's be realistic, if you're talking about the Fed balance sheet your talking about the deficit which is entirely a political creature. If you can't acknowledge that than it's impossible to have an intelligent conversation about this. And yes, it is quite obvious that while I address every question you ask, you duck and jive away from every question I asked because apparently they're inconvenient for you. So let's just remind you of what they are, starting from the top. I've conveniently numbered them so you can conveniently answer in line and it will be that much more obvious when you fail to address them. 1. As a start, perhaps you can iterate exactly what you think a sustainable level is and specifically why? 2. Why, specifically, is QE a problem? Is any and all expansion of money supply bad? If not, what level is bad and why, exactly? "Because QE" isn't a reason. 3. I'd be interested in seeing your posts around May 5th 2020 when the latest massive spike happened showing your concern then? 4. You were equally concerned and crying crocodile tears about this last May? Two years ago? Or just now? Given that it's a continuing problem according to you, one wonders why just at the end of Jan this year you decided to speak up about it? 5. Why is it untenable? Come on man, focus. I know it hurts, but you can do it, you can actually address the questions. I know you can. I have faith in you!
I don't know that we can answer that because back in the good old laissez faire days we had significant recessions that lasted several years with only few year of recovery in between. That's what we would have had absent the Fed doing anything when COVID hit, for example. The interest rates would be a somewhat moot point at that point.
Well back in March'10 the 10 year was 4.01% - QE I had just completed. "QE affects the economy through changes in interest rates on long-term Treasury securities and other financial instruments (e.g., corporate bonds). To have an appreciable impact on interest rates, QE requires large-scale asset purchases. When the Fed makes such purchases of, for example, Treasury securities, the result is an increased demand for those securities, which in turn raises their prices. Treasury prices and yields (interest rates) are inversely related: ..." You know the above. But who wrote it? The Fed of course. Come on, Fed buys rates go down and stay down. If (never happen anytime before ... hell freezes over) Fed sells what they bought, better get a bigger calculator. That is what has changed at The Fed. They don't undo what they previously did.
But were starting to undo it before COVID came and absent the Trump tax cuts they could easily have unwound over the past 4 years without significantly impacting the economy. The Fed is just one lever on the economy, if the other levers allow them to unwind they will. They don't like being at near zero interest rates either.
I am only interested in discussing how this impacts the economy. I don't see why a discussion is not something you are willing to partake in. That is all on you. My trades are irrelevant to this discussion. I am not selling books nor am I telling people how to trade.
You were responding to Sig here, but I want to take this opportunity to encourage you to read my somewhat long response to you and study it, because I think it will help you get over the notion that a swollen balance sheet of assets will eventually be a problem for the Fed. Consider that those assets are Treasuries and each one represents an addition of newly created "outside" money credited to private sector, bank reserve accounts. (During QE, the fed bought Treasuries on the secondary market and credited Bank Reserve accounts.) If the Fed holds those Treasuries to Maturity what do you think will happen. That's right, the bond will disappear and any yield plus principal value will accrue to the Fed which will then turn around and credit the Treasury's reserve account by that amount, minus fed expenses. As long as those entries on the Fed's balance sheet are U.S. Treasuries, and they are held to maturity, what happens is virtually no different than if the Fed were to just draw a line through each of those entries on their balance sheet, in either case the net result would be to leave in the private sector the money created, when the fed "bought" the treasuries. That may not be desirable. To the extent it isn't, either the fed will sell bonds on the secondary market, removing money from reserve accounts and replacing it with a Treasury liability, or alternatively, Congress may raise taxes, permanently removing excess outside money from the economy. The Fed's swollen balance sheet is really no problem. The Fed and Treasury, in the final analysis, are really one giant coordinated operation. They are just, very wisely, made to look like separate operations to give some protection from political meddling into monetary policy. There are constraints but the fed balance sheet is not one of them.
That's true. The had started to sell bonds, removing money from bank reserve accounts and pushing rates up, and then Covid hit.