Friday, December 9th, 2016 MST

QE Watch 3: Inflation continues unabated

Regarding the December Fed’s meeting, the Financial Times chose to report on the dissent within the ranks about whether QE3 will end December 2013.

To waste news print on what might happen twelve months from now indicates the little understanding that financial reporters have regarding the politics in Washington.  If Congress’ ten-year “solution” to our nation’s financial woes is “a solution in hereafter,” what the Fed will decide in December 2013 is about as nebulous.   What the Fed does on a day-to-day basis is a better indication of what is to come.

To the Financial Times credit, they did note that as the Fed continues to make its scheduled $85 billion monthly purchases for the rest of 2013, another $1 trillion will be added to the Fed’s holdings.  Since 2008, the Fed’s holdings (balance sheet) have increased 3.6 fold, now standing just shy of $2.9 trillion.  Tack on another $1 trillion and the Fed’s balance sheet will increase by more a third in only one year.

At the start of the Global Financial Crisis, the Fed’s holdings were a mere $800 billion.  With Fed holdings now at $2.9 trillion, that’s an average annual increase of a little more than $500 billion.  Now the Fed plans adding $1 trillion over the next twelve months.  Inflation continues unabated.

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