{"id":35815,"date":"2018-07-08T08:11:32","date_gmt":"2018-07-08T13:11:32","guid":{"rendered":"http:\/\/olduvai.ca\/?p=35815"},"modified":"2018-07-08T08:11:32","modified_gmt":"2018-07-08T13:11:32","slug":"update-on-the-feds-qe-unwind","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=35815","title":{"rendered":"Update on the Fed\u2019s QE Unwind"},"content":{"rendered":"
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Update on the Fed\u2019s QE Unwind<\/a><\/h3>\n<\/header>\n
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With QE, the Fed created money to buy securities and pump up asset prices; now it sheds securities to destroy this money.<\/strong><\/p>\n

Here\u2019s what the Fed\u2019s QE unwind \u2013 or the balance sheet normalization, as it calls it \u2013 is all about: it reverses over an unknown span of years a large part of what QE had done over the span of five-and-a-half years. During QE, whose stated purpose was the \u201cwealth effect,\u201d the Fed amassed $3.4 trillion in Treasury securities and mortgage-backed securities (MBS). Just as the Fed spent a year tapering QE to zero, it is now spending a year ramping up the QE unwind.<\/p>\n

Total assets on the Fed\u2019s balance sheet<\/a> for the week ending July 4 dropped by $29.4 billion over the past four weeks. This brought the total drop since October, when the QE unwind began, to $171 billion. At $4,289 billion, total assets are now at the lowest level since April 16, 2014, during the middle of the \u201ctaper.\u201d<\/p>\n

\"\"<\/p>\n

The Fed\u2019s announced plan calls for shedding up to $420 billion in securities this year and up to $600 billion a year in each of the following years until the Fed considers its balance sheet to be \u201cnormalized\u201d \u2014 or until something major goes awry. For June, the plan calls for the Fed to shed up to $18 billion in Treasuries and up to $12 billion in MBS. So how did it go?<\/p>\n

Treasury securities<\/strong><\/p>\n

The balance of Treasury securities fell by $17.5 billion in June to $2,360 billion, the lowest since May 7, 2014. Since the beginning of the QE-Unwind, $105 billion in Treasuries \u201crolled off.\u201d<\/p>\n

The step-pattern in the chart below is a result of how the Fed sheds securities. It doesn\u2019t sell them outright but allows them to \u201croll off\u201d when they mature. Treasuries only mature mid-month or at the end of the month. Hence the stair-steps.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Update on the Fed\u2019s QE Unwind With QE, the Fed created money to buy securities and pump up asset prices; now it sheds securities to destroy this money. Here\u2019s what the Fed\u2019s QE unwind \u2013 or the balance sheet normalization, as it calls it \u2013 is all about: it reverses over an unknown span of […]<\/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":[303,536,661,8701,662,8625,3650,4254,4255],"class_list":["post-35815","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fed","tag-money","tag-qe","tag-qt","tag-quantitative-easing","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\/35815","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=35815"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35815\/revisions"}],"predecessor-version":[{"id":35816,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35815\/revisions\/35816"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=35815"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=35815"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=35815"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}