In response to the Global Financial Crisis from 2007 to 2009, the world’s major central banks increased their assets on balance sheet, mostly government bonds, from $3 trillion in 2007 to $14.5 trillion in 2017. This represented an increase of almost 400% in less than 10 years. Over the same period, the Fed increased its balance sheet from $800 billion to $4.4 trillion, a jump of 450%. This was called QE, and its purpose was to flood Main Street and (primarily) the financial markets with liquidity in order to avoid a systemic collapse. The Fed also cut interest rates to virtually zero for the entire period, for the same reason.
Following Donald Trump’s election in November 2016, the stock market rose almost continuously in 2017 with the least number of 1% or more down days in history. The Fed saw its opportunity to “normalize” its balance sheet, or in simple terms, reduce it in order to regain some monetary policy credibility and, ostensibly, avoid the risk of rampant inflation. The plan was called Quantitative Tightening, or QT, and involved both raising interest rates and reducing the size of the balance sheet. For the purposes of this article, I’ll be focusing solely on the balance sheet.
QT started in November 2017 when the Fed began reducing its holdings by $10 billion monthly. It would increase the amount being reduced by an additional $10 billion at the end of each quarter until it reached a maximum of $50 billion monthly or $150 billion each quarter. The plan was to unwind much of the assets purchased in the preceding 10 years, and the process would take years to complete. QT effectively ended less than two years later in September 2018. What happened? Stocks crashed.
more,,
http://www.investmentwatchblog.com/from-qe-to-qt-and-back-to-qe/
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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