Credit Bubble Bulletin/Doug Noland/3-18-2023

graphic image of a wizard in silouette“Federal Reserve Total Assets surged $297 billion last week to $8.639 TN, in one week reversing four months – and over half – of recent QT (quantitative tightening). A $10 TN balance sheet by year end would not be surprising,” says Credit Bubble Bulletin’s Doug Noland in his regular Saturday update.” I appreciate that officials last weekend believed they needed to ensure all SVB and Signature depositors to stem a potential systemic bank run. Just as the Bernanke Fed had justification for opening the floodgate for unprecedented money printing… Where does it all end? For one thing, the Fed’s balance sheet will be getting much larger. I’ll assume global central bank balance sheets will also inflate.”

USAGOLD note: The additions to the balance sheet amount to a very large pool of printed money sitting in the financial system waiting to be unleashed – eventually as price inflation, as we are seeing now. In this case, the Fed is likely to argue that it expects the money to be repaid and therefore removed from the money supply, but it is being loaned to banks that are insolvent or nearly insolvent and struggling to keep their doors open. How likely is it that these loans will be repaid? There is much to this bailout that needs to be explained. For instance, if and when the rescued banks pay off their loans will they receive back the underwater securities they put up as collateral– at par?

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