Peter Schiff: Fed Capitulation Is Just the First Piece of the Puzzle

Peter Schiff: Fed Capitulation Is Just the First Piece of the Puzzle

Stocks got a boost on Friday and gold rose 1.8% on further signs that the Federal Reserve is capitulating.

An article in the Wall Street Journal basically confirmed the Fed is now thinking about winding down its quantitative tightening program. As a CNBC headline put it, “The Fed may be moving closer to ending its rally-killing balance sheet reduction.” As Peter put it in a recent podcast, “The Federal Reserve is having to prematurely abort quantitative tightening, which is exactly what I said they were going to do before they shrunk the balance sheet by the first dollar.”

Not too long ago, it was on autopilot, they were just going to leave it alone and it was going to keep on going and then the market started to cave and then they change that to, well, we’re data dependent and now the market starts to go down a little bit more and all of a sudden we’re almost done. “

Peter said the central bank was never going to be able to significantly shrink its balance sheet.

I said before they made any significant progress in reducing that balance sheet they would have to stop. And that is exactly what they did.”

The Fed began the balance sheet roll-off in October 2017. At that point, it had grown to $4.5 trillion after three rounds of quantitative easing.

The Federal Reserve hasn’t actually been selling off bonds. It has simply allowed the proceeds from mature bonds to roll off instead of reinvesting them. According to CNBC, “The maximum roll-off is $50 billion a month, though it is rarely, if ever reached — December saw about a $34 billion reduction in the Treasurys and mortgage-backed securities that are involved in the program.”…..more here

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