The Dollar Dearth and the U.S. Economy

With signs of economic weakness popping up everywhere, the Federal Reserve has come under increasing pressure to slow down the pace of interest rate hikes.  The Fed has hiked rates six times since President Trump took office and is on track to up the pinch point again in December.  The Fed’s interest rate policy has long been material for financial new headlines, but it is only part of the current cycle of monetary tightening.  Another part is the admittedly wonkish issue of reducing the Fed’s balance sheet.  Policymakers should give it more prominence because it is siphoning billions of dollars out of the economy.  Some analysts go so far as to say that, coupled with interest-rate hikes, it could tip the U.S. into recession. Today the Federal Reserve owns some $4.1 trillion in financial assets, most of which are intermediate-term U.S. Treasury bonds of five to seven years maturity, but it also shows $1.6 trillion in mortgage-backed securities...(Read Full Article)