On Monday, 06 April, 2020 the Financial Times reported that the Federal Reserve balance sheet could increase to $9 trillion. This is partly due to the myriad of initiatives, some new, to protect the economy of the United States during the 2020 Coronavirus Pandemic.
A lot of online commentary is alarmist and centres on the threat of hyperinflation and many of the news articles don't inform the reader how the Federal Reserve purchases assets.. This puts the average citizen at a disadvantage when understanding the economic impact.
My question is multi-faceted (but singlular) and aiming to focus purely on the economics.
- How does the Federal Reserve unwind the positions on their books? Do financial services have to purchase the assets back at a later date and does the Federal Reserve charge a premium for the service?
- Can a position of this size (60% of national output) actually be unwound?
If this question is similar to the approaches of other Central Banks then please tag accordingly if appropriate.