{"id":28656,"date":"2017-12-08T07:09:05","date_gmt":"2017-12-08T12:09:05","guid":{"rendered":"http:\/\/olduvai.ca\/?p=28656"},"modified":"2017-12-08T07:09:05","modified_gmt":"2017-12-08T12:09:05","slug":"the-feds-qe-unwind-is-really-happening","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=28656","title":{"rendered":"The Fed\u2019s QE-Unwind is Really Happening"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2017\/12\/07\/the-feds-qe-unwind-is-really-happening\/\">The Fed\u2019s QE-Unwind is Really Happening<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>Fed\u2019s assets drop to lowest level in over three years.<\/strong><\/p>\n<p>The Fed\u2019s <a href=\"https:\/\/www.federalreserve.gov\/releases\/h41\/\" target=\"_blank\" rel=\"noopener\">balance sheet<\/a> for the week ending December 6, released today, completes the second month of the QE-unwind. Total assets initially zigzagged within a tight range to end October where it started, at $4,456 billion. But in November, holdings drifted lower, and by December 6 were at $4,437 billion, the lowest since September 17, 2014:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-37393\" src=\"https:\/\/wolfstreet.com\/wp-content\/uploads\/2017\/12\/US-Fed-Balance-sheet-2017-12-07_to_2014.png\" alt=\"\" width=\"489\" height=\"400\" \/><\/p>\n<p>\u201cBalance sheet normalization?\u201d Well, in baby steps. But the devil is in the details.<\/p>\n<p>The Fed\u2019s <a href=\"https:\/\/wolfstreet.com\/2017\/09\/20\/this-fed-is-on-a-mission\/\" target=\"_blank\" rel=\"noopener\">announced plan<\/a> is to shrink the balance sheet by $10 billion a month in October, November, and December, then accelerate the pace every three months. By October 2018, the Fed would reduce its holdings by up to $50 billion a month (= $600 billion a year) and continue at that rate until it deems the level of its holdings \u201cnormal\u201d \u2013 the <em>new normal<\/em>, whatever that may turn out to be.<\/p>\n<p>Still, the decline so far, given the gargantuan size of the balance sheet, barely shows up:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-37394\" src=\"https:\/\/wolfstreet.com\/wp-content\/uploads\/2017\/12\/US-Fed-Balance-sheet-2017-12-07-back-to-2007.png\" alt=\"\" width=\"490\" height=\"370\" \/><\/p>\n<h3><strong>The Fed is unloading its Treasuries alright.<\/strong><\/h3>\n<p>As part of the $10-billion-a-month unwind from October through December, the Fed is supposed to unload $6 billion in Treasury securities a month plus $4 billion in mortgage-backed securities (MBS) a month.<\/p>\n<p>The Fed doesn\u2019t actually sell Treasury securities outright. Instead, it allows some of them, when they mature, to \u201croll off\u201d the balance sheet without replacement. When the securities mature, the Treasury Department pays the holder the face value. But the Fed, instead of reinvesting the money in new Treasuries, <em>destroys<\/em> the money \u2013 the opposite process of QE, when the Fed <em>created<\/em> the money to buy securities.<\/p>\n<p>This happens only on dates when Treasuries that the Fed holds mature, usually once or twice a month.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Fed\u2019s QE-Unwind is Really Happening Fed\u2019s assets drop to lowest level in over three years. The Fed\u2019s balance sheet for the week ending December 6, released today, completes the second month of the QE-unwind. Total assets initially zigzagged within a tight range to end October where it started, at $4,456 billion. But in November, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[49,303,17394,8625,3650,4254,4255],"class_list":["post-28656","post","type-post","status-publish","format-standard","hentry","category-economics","tag-balance-sheet","tag-fed","tag-qe-unwind","tag-quantitative-tightening","tag-us-federal-reserve","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28656","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=28656"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28656\/revisions"}],"predecessor-version":[{"id":28657,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28656\/revisions\/28657"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=28656"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=28656"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=28656"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}