The size of the Fed’s balance sheet fluctuates between $4.39 trillion and $4.50 trillion each month as MBS are paid down and then more are purchased to replace the paper that was paid down. While the Fed's balance sheet is not expanding, the Fed continues to pump cash into Primary Dealer accounts via mid month MBS purchase settlements of forward purchase contracts from the previous 2 months. The dealers use that cash for whatever they want, including the purchase of more MBS, or Treasuries, or even stocks. That cash helps to rig the markets, for now keeping the bias to the upside. But pressures are building that could reverse the tilt of the playing field.
Hints of A Coming Plot Climax in the Fed and Banking System Soap Opera
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David Stockman’s Contra Corner isn’t your typical financial tipsheet. Instead it’s an ongoing dialogue about what’s really happening in the markets… the economy… and governments… so you can understand the world around you and make better decisions for yourself.
David believes the world -- certainly the United States -- is at a great inflection point in human history. The massive credit inflation of the last three decades has reached its apogee and is now going to splatter spectacularly.
This will have lasting ramifications on how governments tax and regulate you… the type of work you and your family members will have available and what you get paid… the value of your nest egg… and all other areas comprising your quality of life.