Timeline for How does the Federal Reserve unwind the asset purchasing scheme announced in response to the 2020 Coronavirus Pandemic?
Current License: CC BY-SA 4.0
10 events
| when toggle format | what | by | license | comment | |
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| May 14, 2020 at 10:28 | vote | accept | Venture2099 | ||
| Apr 7, 2020 at 18:39 | comment | added | Brian Romanchuk | The reason why the Fed’s balance sheet was unwound slowly was because inflation was below target. If inflation rise, there’s no issue with unwinding it faster. We also run into the issue that there is no a lot of evidence that QE had any effect on the real economy or inflation. | |
| Apr 7, 2020 at 17:41 | comment | added | fantastic peace and prosperity | @KentShikama And more recently voxeu.org/article/… "Might inflation rise as a result of policies undertaken during the current crisis and as demand comes back more strongly than supply when it ends? This column argues that it is possible, but far from clear. Indeed, there are reasons to doubt whether any rise in inflation will come. Looking back at past crises – and in particular wars – reveals some similarities but more differences with the current pandemic." | |
| Apr 7, 2020 at 17:36 | comment | added | fantastic peace and prosperity | And "Cutting back on output with containment policies while boosting spending with stimulus packages is likely to be inflationary. That’s not all bad in these deflationary times, but it could get out of hand – as it did in the 1970s." | |
| Apr 7, 2020 at 17:32 | comment | added | fantastic peace and prosperity | @KentShikama: I've seen economists talk (I'll add link once I find it again--it was one of the many Voxeu CEPR articles IIRC) that "this time will be different" in the sense that once people return from the lockdown en-masse [assuming that happens], there will be a spending surge, which is worrisome inflation wise. But it was "just talk" not an actual model. Found it "More circular spending with less circular production can lead to inflation." voxeu.org/article/… | |
| Apr 7, 2020 at 17:22 | comment | added | Brian Romanchuk | There’s no actual evidence that “unwinding” is even necessary, nor is there much evidence it mattered. | |
| Apr 7, 2020 at 17:20 | history | edited | Brian Romanchuk | CC BY-SA 4.0 |
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| Apr 7, 2020 at 16:37 | comment | added | Kent Shikama | As an answer to "[c]an a position of this size (60% of national output) actually be unwound", "[t]he Fed was eventually able to slowly run down its balance sheet in the last cycle" is slightly misleading as they weren't able to make any serious progress: they went from around \$4.4 trillion to \$3.7 trillion (fred.stlouisfed.org/series/WALCL). | |
| Apr 7, 2020 at 16:28 | comment | added | Henry | +1 though there is also no reason to believe this time is the same, as the liquidity/solvency issues seem to be different based on lockdown rather than overleveraging. The 2013 "temper tantrum" suggested that markets were overly sensitive to Fed behavior, and could be again. | |
| Apr 7, 2020 at 14:25 | history | answered | Brian Romanchuk | CC BY-SA 4.0 |