They’re still at it! Every month the balance shrinks by many billions of dollars. In conjunction with the support of the mainstream media, the Federal Reserve continues spinning its tale of employment, (price) inflation, and Quantitative Tightening (QT).
The current balance sheet level of $8.4 trillion has not been seen since 2021.
Last month’s QT countdown ended January 4th. Since then, the balance sheet decreased by $74 billion dollars. From Jan 4 to Feb 1, the reports come out every Thursday, the US Treasuries (UST) balance decreased by $60 billion and the Mortgage-Backed Securities (MBS) by $17 billion.
Eight months of official QT is a firm commitment requiring the media and intelligentsia support. The media’s role in reiterating the narrative is vital to success: initially to create expectations and then to provide a rationalization; as Reuters recently has done:
The U.S. Federal Reserve is likely to need at least two more interest-rate hikes, lifting the benchmark rate to above 5%, to slow an unexpectedly strong labor market seen as contributing to high inflation.
According to one of the world’s most read news sources, the high inflation we’re experiencing is due to an “unexpectedly strong labor market,” literally, they claim prices are rising because people are working.
Should we believe the data:
… the unemployment rate fell to 3.4%, the lowest in more than 50 years.
The mental gymnastics are astounding. On one hand, labor statistics are practically fraudulent, such as removing discouraged workers from the data to make the stats seem better. However, should we believe the data, then this must be the hottest jobs market in half a century, creating a workforce so strong it leads to increases in prices for all! Therefore, we should warm up to the idea of having more people out of work, so that prices come down again.
This backwards logic was confirmed by Oxford Economics Chief US Economist, Ryan Sweet:
While the Fed welcomes any signs of easing wage pressures, the pace of growth in average hourly earnings is still too strong to help lower inflation.
And so, if the Fed, the mainstream media, and mainstream economists are not going to blame COVID, Russia, or themselves for the broad increases in prices of goods and services, then surely it’s out of control wages, or too many jobs creating the problem.
Ultimately, the boom always leads to the bust. The way things are headed, the increase in rates and shrinking of the balance sheet will ensure their precious plans will come to fruition. Much like those decades of stubbornly low inflation that was finally overcome by out of control inflation, expect higher unemployment and less wage growth soon enough; then they’ll comfort us by saying it was all part of the plan.
