Attention Economy


Friday, March 17, 2023

Significance of Bank Balance Sheets

The Fed’s Balance Sheet Looks Like Silicon Valley Bank’s
https://www.nytimes.com/2023/03/17/opinion/silicon-valley-bank-federal-reserve.html
Kupiec, who worked for the Fed for 10 years, said the Fed’s losses are the result of a bond-buying program — several rounds of what’s known as “quantitative easing” — that went beyond what was needed or what Congress envisioned. …
Kupiec worries that the Fed’s solution to chronic losses could be inflationary, pointing me to a 2014 paper by Marvin Goodfriend, who was an economist at Carnegie Mellon University. “A period in which the central bank is seen as having to create reserves (to pay interest on its liabilities) to stabilize the purchasing power of money will rightly unnerve and very possibly unhinge inflation expectations,” Goodfriend wrote.