Santelli states it succinctly, the Federal Reserve's exit of it crisis mode strategy will be 'messy'. However, messy may be an understatement.
As of Jan 30th, the Fed's balance sheet is levered by nearly 55x, as over $3 trillion in assets is being supported by just $54.8 billion in capital. Unless you are a reader of John Hussman or the like, these figures are never mentioned by any main stream media source, but may have profound impact on everything from the global economy to your portfolio's performance. In March of 2000, the Federal Reserve took back $30 to $40 billion in excess liquidity, previously floated to alleviate any potential problems with Y2K, which helped reciprocate the NSADAQ crash that year. What would happen if the Fed had to reduce the balance sheet by $500 billion to say offset a rise inflation expectations?
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