Fed Underestimates the Potency of its Balance Sheet At its Peril

The Fed believes reducing the balance sheet and raising Fed funds are interchangeable. This view is flawed, according to Julian Brigden from MI2 Partners. The balance sheet is far more potent than the Fed thinks, and hence is more dangerous, Brigden argues in this piece. One should be aware of the consequences, which are that a reduction in the balance sheet is deflationary, would most likely turbo charge the dollar and – unless credit creation steps up to fill the gap – could lead to a major draw down in 2018. This piece can be purchased on RSRCHXchange, alternatively contact the provider directly.