I’m something of a layman at how this works. But that doesn’t stop me from having an opinion / grin
The Fed’s balance sheet is now so big that it is running out of the “assets” it uses to “buy” the Treasuries, making it more and more difficult to maintain the smoke and mirrors of the game. Because the Fed can’t *legally* print money, it has to rely on the fiction of using over valued assets as collateral to buy the notes.
I think the Fed’s balance sheet is reaching the point where it can no longer be pretended that any of it is real. They are trying to back out before that happens, but it’s gone on so long that the cure is liable to kill the patient.
IOW, we are screwed.
It can create money out of thin air to buy those Treasuries and MBS.
Because the Fed can’t *legally* print money
It's a Central Bank, of course it can legally create money out of thin air, printed or otherwise.
it has to rely on the fiction of using over valued assets as collateral to buy the notes.
No it doesn't.
I think the Fed’s balance sheet is reaching the point where it can no longer be pretended that any of it is real.
Of course their purchases are real. Real bonds that pay about $100 billion a year in interest.