This Great Graphic comes from Also Spracht Analyst. It shows the composition of the Federal Reserve's balance sheet as of November 1. There has been some fluctuation since QE3+ was announced, but the Fed's balance sheet is essentially flat.
The reason appears to be due to technical factors having to due with idiosyncrasies of the mortgage-backed securities (MBS) market, where settlement take place once a month and delivery can take up to six months.
In addition, refinancing of mortgages results in early pre-payment of previously borrowed money. The maturing of current MBS holdings may be taking place faster than new ones can show up on the Fed's balance sheet.
There is no reason to doubt that QE3+ will produce an expansion of the Fed's balance sheet. The real question is whether this expansion is going to bring the Fed any closer to its full employment objective. It is not clear that changing the assets available to the private sector, which is what QE does, is an effective economic accelerant. What it may do is add lubricant to the private sector de-leveraging process, which continues.
Great Graphic: QE3+ Yet to Impact Balance Sheet
Reviewed by Marc Chandler
on
November 04, 2012
Rating:
Reviewed by Marc Chandler
on
November 04, 2012
Rating:
