Federal Reserve Assets Top $3 Trillion

The Fed’s balance sheet just topped $3 trillion for the first time ever according to the Wall Street Journal,

The U.S. Federal Reserve‘s balance sheet topped $3 trillion for the first time as the central bank continued with its easy-money policy.

The Fed’s asset holdings in the week ended Jan. 23 increased to $3.013 trillion from $2.965 trillion a week earlier, the central bank said in a weekly report released Thursday.

The Fed’s holdings of U.S. Treasury securities rose to $1.697 trillion Wednesday from $1.689 trillion a week earlier. The central bank’s holdings of mortgage-backed securities rose to $983.17 billion, from $947.61 billion a week ago.

Jan24_Fed Balance Sheets

How much QE is leaking into the economy?

We have posted several pieces (see here and here) on how the expansion of the Fed’s balance sheet is financed by reserve creation, which are held by depository institutions in the form of excess reserves and not circulating in the economy.   In the chart below we try and get a sense of how much of the quantitative easing has leaked out of the banking system into the economy.

The monthly data in the chart below is the year on year change ($ billions) of total Federal Reserve assets less excess reserves of depository institutions.   Because the last observation of excess reserve data is from December the chart doesn’t capture the latest effects of quantitative easing.

Though the calculation is a bit noisy, the chart does illustrate why the massive expansion of the central bank’s balance sheet has yet to translate into a significant increase in inflation.  When credit begins to expand as the economy picks up the Fed will have to execute what George Soros calls the “delicate two-phase maneuver” and remove the excess liquidity from the financial system.

Jan24_Liquitidity Into the System

(click here if charts are not observable)

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4 Responses to Federal Reserve Assets Top $3 Trillion

  1. The Wolf says:

    A reblogué ceci sur le blog a lupus…un regard hagard sur l'écocomics et ses finances…. and commented:
    Add your thoughts here… (optional)

  2. Pingback: Federal Reserve Assets Top $3 Trillion | Global Macro Monitor | Finding Trout In Your Milk?

  3. Mike says:

    Reblogged this on This Got My Attention and commented:
    Money, Money, Money!

  4. One of the main ways that the Fed has been able to control the direction of the economy is through their interest rate policy. By lowering rates, and therefore encouraging lending, the Fed believes the resulting increase in lending will stimulate economic growth, employment and inflation.

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