The Fed’s enormous balance sheet in seven charts - Slide Show - MarketWatch

The Fed’s enormous balance sheet in seven charts - Slide Show - MarketWatch: "









Left: Former Federal Reserve Chairman Ben Bernanke, and his successor, Janet Yellen. The Fed’s balance sheet is approaching $4.1 trillion, a hard number to wrap your head around. It’s a big number, even by Washington standards. It’s twice the government expenditures for all 50 states, equal to the net worth of 56 Bill Gates and could buy 6.5 billion iPhones, notes Vincent Reinhart, chief U.S. economist at Morgan Stanley. How did the Federal Reserve’s balance sheet get so big? What does it mean for markets? Will it lead to crippling inflation down the road? With the Federal Reserve publishing its annual report on its open market operations, it is a good time to look at the balance sheet under a microscope. The balance sheet was expanded under the leadership of former Fed Chairman Ben Bernanke. Many think that the principal task of his successor, Janet Yellen, will be to reduce the size of the Fed’s asset holdings without upsetting financial markets. -- Greg Robb "










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With short-term interest rates stuck at zero, the Fed began in the spring of 2009 to buy $1.1 trillion of Treasurys and mortgage-backed securities in a program that became known as quantitative easing. The idea was to bring down long-term interest rates and spur growth. Investors were also expected to be pushed out of safe assets and take more risks.


This chart shows three waves of purchases, the first round in the spring of 2009, a second round of purchases when the economy stumbled in November 2010 and a third round in September 2012 after another soft patch.


In 2013 alone, the Fed’s balance sheet actions resulted in cumulative additional purchases of $1.02 trillion of longer-term securities to a year-end level of $3.8 billion.


During the year, Treasury holdings grew by $543 billion and MBS holdings grew by $509 billion.The Fed projects its balance sheet will peak at $4.2 trillion late this year as the Fed has begun to taper its bond purchases.







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This chart shows how much bond buying has turned central bank investment policy on its head, said Lou Crandall, chief economist at Wrightson ICAP. Central banks used to hold assets with short maturities so they could raise cash in case of emergencies.


Short-term assets used to make up 60% of the Fed’s portfolio but now represent less than 10%.













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Link:http://www.marketwatch.com/story/the-feds-enormous-balance-sheet-in-seven-charts-2014-04-18










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The Fed’s enormous balance sheet in seven charts - Slide Show - MarketWatch: "







 Left: Former Federal Reserve Chairman Ben Bernanke, and his successor, Janet Yellen.

The Fed’s balance sheet is approaching $4.1 trillion, a hard number to wrap your head around.

It’s a big number, even by Washington standards. It’s twice the government expenditures for all 50 states, equal to the net worth of 56 Bill Gates and could buy 6.5 billion iPhones, notes Vincent Reinhart, chief U.S. economist at Morgan Stanley.

How did the Federal Reserve’s balance sheet get so big? What does it mean for markets? Will it lead to crippling inflation down the road?

With the Federal Reserve publishing its annual report on its open market operations, it is a good time to look at the balance sheet under a microscope.

The balance sheet was expanded under the leadership of former Fed Chairman Ben Bernanke. Many think that the principal task of his successor, Janet Yellen, will be to reduce the size of the Fed’s asset holdings without upsetting financial markets.

-- Greg Robb

"

EMAIL





With short-term interest rates stuck at zero, the Fed began in the spring of 2009 to buy $1.1 trillion of Treasurys and

mortgage-backed securities in a program that became known as quantitative easing. The idea was to bring down long-term interest rates and spur growth. Investors were also expected to be pushed out of safe assets and take more risks.


This chart shows three waves of purchases, the first round in the spring of 2009, a second round of purchases when the economy stumbled in November 2010 and a third round in September 2012 after another soft patch.


In 2013 alone, the Fed’s balance sheet actions resulted in cumulative additional purchases of $1.02 trillion of longer-term securities to a year-end level of $3.8 billion.




During the year, Treasury holdings grew by $543 billion and MBS holdings grew by $509 billion.The Fed projects its balance sheet will peak at $4.2 trillion late this year as the Fed has begun to taper its bond purchases.

This chart shows how much bond buying has turned central bank investment policy on its head, said Lou Crandall, chief economist at Wrightson ICAP. Central banks used to hold assets with short maturities so they could raise cash in case of emergencies.


Short-term assets used to make up 60% of the Fed’s portfolio but now represent less than 10%.





See More
Link:http://www.marketwatch.com/story/the-feds-enormous-balance-sheet-in-seven-charts-2014-04-18