from Sovereign Man:
Remember all that talk about “taper” last year?
After years of conjuring trillions of dollars out of thin air and rapidly expanding its balance sheet, the Federal Reserve promised to end its unprecedented ‘Quantitative Easing’ (QE) programs.
In total the Fed’s balance sheet exploded from $800 billion to $4.5 trillion between 2008 and 2014. And this wasn’t good news.
A huge balance sheet means that the Fed is overleveraged. It means that they have only a tiny margin of safety in reserve in case there are serious problems in the financial system.
Back in 2008, major banks (like Lehman Brothers, Wachovia, etc.) also had massive balance sheets that were overleveraged, and almost no margin of safety.
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