Sometimes they want to take it down

Fed Balance Sheet Gaslighting.

This podcast set me off this morning…

Contrarian Investor Podcast Host:

What can you tell us about the last cycle, which sounds like it lasted from late 2015 through 2019, so about four years, and what kind of stuff you and the Fed were looking for - you touched on some of it, before reversing course, and how that process worked.

Jake Schurmeier, who “spent several years at the Federal Reserve Bank of New York’s open markets trading desk, where he was responsible for implementing monetary policy and monitoring the treasury markets”:

The principle lesson was that we can do QT. It had never been done in the size that the Fed was trying at the end of 2017, we accomplished that goal, we ran down the balance sheet successfully - you know, you had some volatility towards the end, but by and large it was a very successful program.

If I had coffee when I heard this, I would have spat it out.

Cathie Wood

As for “some volatility towards the end” of QE in 2018, if you remember, by Christmas 2018 everyone on CNBC was crying and whining about “the worst market since 1931.” It was a joke.

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Congressman Ron Paul with Citadel-Intern Ben Bernanke, March 25, 2010

    Dr. Paul: Can you give me a rather quick answer on this? Do you have any idea what percentage the base should shrink or might shrink, or is that something that you don't even want to address?

    Mr. Bernanke. No. I think we would like to bring the balance sheet back to something consistent with where it was before the crisis, which means enough to accommodate Americans' demand for currency, plus a modest amount of reserves in the banking system, and that would suggest something under a trillion dollars I think would be--

    Dr. Paul. A trillion dollars?

    Mr. Bernanke. Or less, yes.

• Re: The supposed end of QE. Nonsense. How much stomach do global central bankers have for rising rates, or lower stock prices? Not much. They're not going to say "Oh well, we tried $20+ trillion and it didn't work. Let's go back to MIT." They'll quadruple down. (Wrote this in August 2018)

• The fact that the Fed is painted in a corner is 100% the Federal Reserve’s fault. They had years to QT Taper Normalize Liftoff etc. and blew it. Citadel Ben started the whole nonsense. Yellen in particular was asleep at the wheel 2014-2018, and Jerome chickened out in Dec. 2018. (January 2022)

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I love this 2020 anecdote about "a recently retired Fed governor":

"I kid you not, Erik. His index finger came out and he started punching the air. And he said it’s all Bernanke’s fault. He started this nonsense and we’ve got to keep it going till we can’t stop."

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"No central bank has managed successfully to reverse quantitative easing over the medium to long term. In practice, central banks have engaged in quantitative easing in response to adverse events but have not reversed the policy subsequently."

- Quantitative easing: a dangerous addiction?

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For fun, I looked up origin of "batshit crazy". Note that Dr. Strangelove had a character named Col. “Bat” Guano: