Why the Fed Might Have to ‘Live’ With a Large Balance Sheet
- Shrinking cross-currency bases attributable to debt ceiling
- Balance sheet shrinkage would tighten policy globally: Pozsar
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What can the U.S. Treasury’s attempts to keep paying the nation’s bills tell us about the Federal Reserve’s quest to reduce its balance sheet after years of stimulus?
Quite a lot, according to Zoltan Pozsar, research analyst at Credit Suisse Group AG in New York. He suggests that by focusing on the ambitions of most Fed officials to begin reducing the central bank’s asset holdings this year, investors may be missing a crucial -- often over-looked -- role of the U.S. government in driving global money supply.