Lying Federal Reserve Has Been Increasing QE

The Federal Reserve is going to find its abolition being seriously debated in Congress in about 12 months time if it doesn't get its act together.

The Federal Reserve announced a taper in November, but since then it has increased quantitative easing. They are buying more assets than before the taper annoucement. The December 1 weekly snapshot of the Fed's balance sheet shored $8.650 trillion in assets. As of December 22, the balance sheet reached $8.790 trillion. An increase of $140 billion.

Federal Reserve: November 03, 2021, FOMC statement

Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage‑backed securities by at least $35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.

The Fed averted a correction in stocks in December, but now that merely pushes it forward in time. My view on less QE is explained in Asset Inflation Is Over, For Now. In a nutshell, asset prices are like an overweight plane trying to stay aloft. Asset prices will not glide with reduced QE; they will quickly enter a nosedive. Why was I wrong about a December correction? Simple: the Fed didn't reduce QE at all. It has increased QE beyond the $120 billion it had been buying.

Markets are aware of what is happening. The PBoC is aware too. There is a growing risk of yen and euro decline, along with yuan devaluation because the Federal Reserve's lies are setting up an explosive reversal in markets.

The truth is markets could go in either direction. If the Fed continues lying, if the Fed really wants high inflation and can't admit it, then the dollar could collapse along with bonds and stocks. Commodities could rip in 2022. If instead the Fed's cowardice has finally caught up with it and it must act, it could trigger multi-year and multi-decade breakouts in the U.S. dollar versus the euro, yuan and yen. Bonds could rip in 2022 as stocks and commodities collapse along with most non-U.S. dollar currencies.