Fed’s Balance Sheet Is Ballooning Out of Control…. The Federal Reserve Is The “Enemy of the People”

The Federal Reserve Is The “Enemy of the People”

In 1977, the Fed’s mandate shifted to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates”.  In short, the Fed has in effect become a central planning institution.  Moreover, the Fed has decimated the return on savings for retirees and others who depend on income from their money market accounts and other financial instruments.

Instead of letting interest rates be determined by supply and demand in the financial markets, the Fed assumes it can “manage” one of the most important “prices” in the US economy.

Finally, consumers, especially low and moderate-income families, will be harmed further as price inflation will accelerate.  The Fed, in short, is an  “enemy of the people”.  

 

Fed’s Balance Sheet Is Ballooning Out of Control: $7 Trillion in Securities, $2 Trillion Mortgages

The Fed Now Owns Nearly One Third of All US Mortgages.

Nearly $7 Trillion in Securities, $2 Trillion Mortgages

As of August 26, 2020 the Fed’s Balance Sheet is nearly $7 trillion total of which $3.7 trillion are notes or bonds, and nearly $2 trillion in mortgages (Fannie Mae, Freddie Mac, or Ginnie Mae).

No End in Sight to Fed’s Mortgage Buying Spree

Bloomberg reports No End in Sight to Fed’s Mortgage Buying Spree.

Key Points

  • The Fed has snapped up $1 trillion of mortgage bonds since March. It bought around $300 billion of the bonds in each of March and April, and since then has been buying about $100 billion a month.
  • The Fed now owns almost a third of bonds backed by home loans in the U.S.
  • Buying the securities has pushed mortgage rates lower, with the average 30-year rate falling to 2.91% as of last week from 3.3% in early February.
  • Morgan Stanley analysts pointed out in late March that the buying was running at eight times the pace seen in prior episodes of Fed purchasing under programs known as quantitative easing.
  • Just before this latest round, principal payments from its mortgage bond holdings had whittled that down to 21%, but it has now increased back to 30%.
  • If the Fed maintains its current buying pace, it will again own 34% of the mortgage universe by year’s end.

Survey by the Fed Finds Widespread Pessimism About Economic Future

The report said that echoing across the country is the continued uncertainty stemming from the pandemic and its negative effect on consumer and business activity.

S&P Reaches Critical Resistance, Valuation At Record High As Liquidity Crashes

The S&P 500’s P/E multiple just broke above the all-time highs from the dotcom bubble…