{"id":50862,"date":"2020-01-31T19:42:34","date_gmt":"2020-02-01T00:42:34","guid":{"rendered":"https:\/\/olduvai.ca\/?p=50862"},"modified":"2020-01-31T19:42:37","modified_gmt":"2020-02-01T00:42:37","slug":"how-the-fed-created-a-qe-monster-for-the-markets","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=50862","title":{"rendered":"How the Fed Created a QE “Monster” for the Markets"},"content":{"rendered":"\n

How the Fed Created a QE “Monster” for the Markets<\/a><\/h3>\n\n\n\n
\"qe
Photo by\u00a0Flickr.com<\/a>\u00a0|\u00a0CC BY<\/a>\u00a0| Photoshopped<\/figcaption><\/figure>\n\n\n\n

Like Victor Frankenstein, the Fed may have created its own monster. It\u2019s been\u00a0called<\/a>\u00a0many things, such as Quantitative Easing (QE), QE Lite, QE\/Not QE, \u201cOrganic\u201d Balance Sheet Growth, and more.<\/p>\n\n\n\n

But no matter what you choose to call it, the bottom line is this:<\/p>\n\n\n\n

The Fed is growing its <\/em><\/strong>official<\/em><\/strong><\/a> balance sheet at a frantic pace to provide liquidity to various banking operations, including the <\/em><\/strong>repo markets<\/em><\/strong><\/a>.<\/em><\/strong><\/p>\n\n\n\n

In fact, the balance sheet has grown about $400 billion since August, as reflected in the uptick at the far right of this chart:<\/p>\n\n\n\n

\"FRED\"<\/figure><\/div>\n\n\n\n

Along with the Fed\u2019s decision to increase its balance sheet is a rise in risky asset prices. According to a piece<\/a> at Newsmax, this is raising eyebrows:<\/p>\n\n\n\n

Prices for stocks and other risky assets are also rising at a fast clip \u2013 a state of affairs that a growing chorus of investors, economists and former Fed officials say is no coincidence, and potentially a problem.<\/em><\/p><\/blockquote>\n\n\n\n

This pattern of rising prices in risky assets is similar to what happened when the Fed initiated the first three rounds of QE.<\/p>\n\n\n\n

The potential problem behind a pattern like this is<\/em> the \u201cmonster\u201d that the Fed is creating. Addressing the problem means answering a critical question\u2026<\/p>\n\n\n\n

When and how does the spigot of Fed cash flow get turned off?<\/em><\/strong><\/p>\n\n\n\n

Peter Boockvar, chief investment officer with Bleakley Advisory Group, thinks<\/a> we will have to wait and see what happens:<\/p>\n\n\n\n

The risk is what happens when the Fed stops increasing their balance sheet\u2026 What will stocks do when that liquidity spigot stops? <\/strong>We\u2019ll have to see.<\/em><\/p><\/blockquote>\n\n\n\n

Of course, if we \u201cwait and see\u201d, any potential damage to the economy will already have started.<\/p>\n\n\n\n

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

How the Fed Created a QE “Monster” for the Markets Like Victor Frankenstein, the Fed may have created its own monster. It\u2019s been\u00a0called\u00a0many things, such as Quantitative Easing (QE), QE Lite, QE\/Not QE, \u201cOrganic\u201d Balance Sheet Growth, and more. But no matter what you choose to call it, the bottom line is this: The Fed […]<\/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":[49,18769,124,303,661,690,3650],"class_list":["post-50862","post","type-post","status-publish","format-standard","hentry","category-economics","tag-balance-sheet","tag-birch-gold-group","tag-central-banks","tag-fed","tag-qe","tag-risk","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50862","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=50862"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50862\/revisions"}],"predecessor-version":[{"id":50863,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50862\/revisions\/50863"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=50862"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=50862"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=50862"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}