The Federal Reserve has been making headlines this year with massive interest rate hikes. Another part of the strategy to tackle inflation is to shrink the balance sheet. They do this, for example, by stopping buying new US government bonds or even selling debt securities.
Less than $300 billion
From its peak, the Fed has yet to shrink its balance sheet by $300 billion. Last week, $2 billion in assets was added to the balance sheet.
= https://twitter.com/Schuldensuehner/status/1591492977741922306 “data-service=”twitter”>
So much for the Fed’s attempts to fight inflation by shrinking its balance sheet. Since June, the balance sheet has shrunk by $236 billion, but in nearly $9 trillion in assets, that’s a pittance.
So it is doubtful whether the Fed will succeed in solving this problem. There is a possibility that money printers will work again in the long run, because the economy simply cannot continue to operate at the current relatively high interest rates. The US economy has become addicted to low interest rates in recent years, and the coming months should show what high interest rates do for businesses.
The European Central Bank is not doing better
By the way, the balance sheet of the European Central Bank is not in much better shape than that of the US Federal Reserve. In fact, you could say that things are worse in the Eurozone than in the US, as evidenced by the performance of the Euro against the US Dollar.
= https://twitter.com/schadensuehner/status/1539278985850499073? lang = en “data-service =” twitter “>
“The ECB’s balance sheet continues to reach all-time highs. Lagarde is running money printers at full capacity, even though the eurozone is experiencing record-high inflation,” Holger Schibtz said of the European Central Bank in June 2022.
With these numbers, the European Central Bank’s balance sheet represents about 82.4 percent of the eurozone’s GDP. The Federal Reserve is at 36.6 percent, the Bank of England is at 39.6 percent, and the Bank of Japan is at a staggering 136.3 percent.
It seems only a matter of time before interest rates drop again, at least in the eurozone, for things to continue. Especially thanks to weaker brothers like Italy, who seem to be 100% confident that at least they won’t get out of debt without help. In the long run, this can only be positive for Bitcoin.
“Twitter junkie. Lifelong communicator. Award-winning analyst. Subtly charming internetaholic.”