Fed Assets Reach Record $4 Trillion on Unprecedented Bond-Buying

[Purveyor]

By Jeff Kearns - Dec 19, 2013

The Federal Reserve’s balance sheet reached a record $4 trillion, as the central bank pushed on with its unprecedented asset-purchase program.

The Fed’s holdings rose $14.1 billion to $4.01 trillion in the past week, the Fed said today in a statement in Washington. Policy makers said yesterday they will slow monthly purchases of Treasuries and mortgage bonds to $75 billion in January, the first cut to the $85 billion pace they maintained for a year.

“We’re going to be living with a big Fed balance sheet for a long time,” said Josh Feinman, the New York-based global chief economist for Deutsche Asset & Wealth Management, which oversees $1.2 trillion, and a former Fed senior economist. “They’re still missing their dual mandate on both sides and that would call for easy monetary policy with unemployment too high and inflation too low.”

Chairman Ben S. Bernanke has raised assets from $2.82 trillion before the third round of quantitative easing began in September 2012 and quadrupled them since 2008 to attack unemployment after the 2008-2009 recession. He said yesterday the Fed may take “similar moderate steps” at each meeting to slow QE, which also carries potential risks.

“As the balance sheet of the Federal Reserve gets large, managing that balance sheet, exiting from that balance sheet become more difficult,” Bernanke said at his press conference. “There are concerns about effects on asset prices, although I would have to say that’s another thing that future monetary economists will want to be looking at very carefully.”

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http://www.bloomberg.com/news/2013-12-19/fed-assets-reach-record-4-trillion-on-unprecedented-bond-buying.html

[Benton D Struckcheon]

1. Monetary policy is ineffective.

But, given that fiscal policy has been restrictive in the extreme, entirely because of one person, Boehner, Bernanke has done as much as he could do. He said as much in the press conference, if you listened to him carefully. In his retirement, I doubt Bernanke will be playing any golf with Boehner.