Posted on 06/07/2022 7:19:00 AM PDT by Browns Ultra Fan
Wall Street on Parade had an excellent article showing the seismic explosion in the Fed’s Balance Sheet after the housing bubble burst and ensuing financial crisis.
Here is my version of their chart since 2000 where you can seen the seismic shift in the balance sheet (toxic green slime line), particularly with The Fed’s response to Covid. The Fed is signaling a tightening in monetary policy to help reduce inflation (blue line).
But notice that M2 Money Velocity (GDP/M2) is now near the all-time low along with consumer purchasing power.
How BIG is The Fed’s balance sheet? Try more that a third of size of US GDP.
And as The Fed signals its inflation-fighting intentions, mortgage rates have shot up to 5.51%, the highest mortgage rate since June 2009.
Here is a video of the seismic shift in The Fed Balance Sheet, now that they are allegedly tightening monetary policy.
(Excerpt) Read more at confoundedinterest.net ...
The velocity of money has collapsed to Depression Era levels. Fed may regret what it wished for if inflation reverts into deflation.
How is the value of your home down 10%, when housing values have grown by double digit percentages over the past few years?
The velocity of money escaping my wallet has accelerated...
When I’m paying for Biden’s high gas ⛽ prices
And Biden’s high food prices.
Don’t worry, we won’t run out of money, they can always just Print More!!
In other words, the debt is four times the amount of all the 'money' to pay it back. Who owned the other $79T to loan it?
The answer to that is embedded in the fact that 'money' ****IS**** debt. 'Legal Tender' is not used to pay off debt, only to transfer it to someone else.
Furthermore, anybody notice that US Spending and US deficit has been decreasing steadily now for many months?
“if inflation reverts into deflation”
We’ve had never-ending inflation for decades. Deflation would not be the worst thing in the world for our economy, in the long run.
Asking for a friend...
It all started with QE after the subprime mortgage crisis.
Once the Fed started buying its own debt, it got hooked on the Crack of being able to make money out of nothing at all, not even secured US Treasury bonds.
its all coming apart.
Zillow and Redfin show my house at 80% over the value three years ago.
Ugh. Taxes come from that value.
If the FED is going to tighten their balance sheet, who is going to buy the US debt?
I’m talking about down 10% from the point in time,perhaps only a few months ago,when mortgage rates were lower than they are today and,probably,*much* lower than they’ll be a year from now. The of the best things that can happen to a person who’s selling a piece of residential real estate is for mortgage rates to be low.
The of the best = one of the best
See Post #14 (and #15)
Your friend will have to wonder as well....
I’ve looked at what info I could find on how the USdebtclock calculates their numbers, and they do provide a good deal. The numbers on the page reflect AFAIK a complex framework of governement released data on periodic basis - day, week, month, whatever. And the gears then churn that to updates dynamically on the webpage.
But, as for the why, I wonder too...
I go to that page quite a bit myself. I mean, lowering a budget deficit that approaches $2 trillion is not exactly something that I would be slapping myself on the back for. I appreciate your observations, just wondered why the deficit and debt are traveling in opposite directions. I suppose someone here will have an answer. I mean, I guess, even if the deficit is getting smaller, as long as it it above zero,the debt will get bigger. As Barbie always says, math is hard.
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