Authored by James Howard Kunstler via Kunstler.com,
And so, as they say in the horror movies, it begins…! The unwinding of the Federal Reserve’s balance sheet. Such an esoteric concept!
Is there one in ten thousand of the millions of people who sit at desks all day long from sea to shining sea who have a clue how this works? Or what its relationship is to the real world?
With Donald Trump's historic tax reform on the verge of passage, and with the Fed continuing its rate hiking cycle so far undeterred, and according to the Fed's own dot plot still having another 7-8 rate hikes to go, China is getting nervous because, as the WSJ reports, it fears "a double whammy sapping money out of China by making the U.S. a more attractive place to invest." In other words, those capital outflows which China was confident it had finally bottled up, are about to return. And that's even as the U.S.
Authored by John Rubino via DollarCollapse.com,
Each quarter, Credit Bubble Bulletin’s Doug Noland posts a “flow of funds” report that analyzes the debt and securities markets data released by the Fed in its Z.1 Report. It’s always shocking to see the numbers we’re dealing with, but even more so lately as history’s biggest financial bubble starts to dwarf its predecessors.
Submitted by Wolf Richter of Wolf Street
The Fed’s balance sheet for the week ending December 6, 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:
“Balance sheet normalization?” Well, in baby steps. But the devil is in the details.
What a difference a year makes: last December, just as the ECB was about to shock the market with the announcement of its first €20 billion QE tapering, macroeconomic data mattered, especially since the Fed's tightening intertia appeared to truly be data-dependent, if only for a very short period of time.