Authored by Jeffrey Snider via Alhambra Investment Partners,
QT. Bank reserves. Balance sheet normalization. They really are going through all the motions in 2019. It’s as if officials can sense something just isn’t quite right. This would amount to a serious setback, of course, having assured the public repeatedly how the financial system has been remade into “resilient.” Janet Yellen, call your current office, Jay Powell’s Federal Reserve isn’t quite so sure any more about that whole bank crisis thing you said.
It’s hard to gauge whether it is mainstream thought that is evolving, or merely the form of its continued stupidity. Nothing ever stands still in this world, but that doesn’t always represent progress.
The Federal Reserve’s Vice Chairman for Supervision is Randall Quarles. He also chairs the Financial Stability Board. Both are resume-padding devices, filling out required requirements about pedigree. Thus, his opinions on monetary matters are given great consideration regardless of their content.
Recently, speaking at a monetary policy forum, he made what sounds like a very odd claim:
Occasionally we hear that banks feel they are under supervisory pressure to satisfy their [high-quality liquid assets] with reserves rather than Treasury securities…. that’s not the case… I don’t think we should have an official preference for reserves.
What he’s really trying to say is that bankers are telling him, and presumably FRBNY, that they are worried about the level of bank reserves. The Fed is reducing that level as it winds down its four prior QE’s. As assets runoff the asset side of its balance sheet, unless something offsetting is done the remainder on the liability side, bank reserves, must fall by an equal amount.
http://www.zerohedge.com/news/2019-03-14/qe5-fed-proposes-repo-facility-save-world?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
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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