The Fed contracts

The Fed has indicated that it plans to pursue a policy of quantitative easing, that is, expanding its portfolio by borrowing in financial markets at low rates and investing the proceeds in higher-yielding private investments. The Fed’s acquisition of large amounts of Fannie and Freddie’s debt was a notable success of that strategy, as it lowered their borrowing rates and thus lowered mortgage rates. But, as the graph below shows, the Fed has engaged in quantitative tightening over the past month, reducing its borrowing and reducing its holdings of higher-yielding investments. The line labed “Other assets” measures that type of investment. So far, no explanation for the Fed’s announcements of moving in an expansionary direction while actually contracting.

fedbal.jpg?w=450&h=327

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Originally published at Woodward & Hall weblog and reproduced here with the author’s permission.

2 Responses to "The Fed contracts"

  1. Guest   February 6, 2009 at 12:41 pm

    I told you many months ago what is going on: Andrew Mellon’s “liquidate liquidate liquidate.” But no one paid any attention and I was booted off the site. Still interested in knowing the truth? Then read West Coast Hotel v. Parrish (1937). That never repealed “liquidate liquidate liquidate.” Which means that as the economy weakens, the Federal Government–responding to the powerful–WITHDRAWS FROM THE SOCIETY.Several generations of idiots–weaned on the idea that when the economy WEAKENS the government INTERVENES–have gotten into their retarded heads the idea that the Federal Government has some sort of “commitment” to the society, and that this is somewhere “mandated.”Silly, stupid, corrupt, mixed up people. Prepare for General MacArthur on his white house, and Obamavilles on the mall.We will have a revolution. And guess what will happen at the end of it? We will have the new maintenance regime in power and we will do what I have been advocating for the last three years:BAN HOUSING EVICTIONS.Just read my wonderful book, The Eminent Domain Revolt.John RyskampP.S. By the way, CAN you read?

  2. Wilbur C. Springer   February 10, 2009 at 7:56 am

    Thank you, Woodward & Hall, for this excellent research.