The Fed has given itself marching orders. Let $10 billion of securities roll-off the books in October. "Rinse and Repeat" in November and December. Come January 2018, increase the roll off to $20 billion per month for 3 months. Increase the roll off of assets by $10 each quarter until it reaches the $50 billion per month level. If the indiscriminate buying of assets (US Treasuries and Agency Mortgages) is called Quantitative Easing (QE), I guess we should call this process Quantitative Tightening (QT). The Fed holds about $4.5 trillion of assets. Before the financial a crisis started, the Fed held just over $900 billion of short-term Treasuries, so they have a long way to go to get back to that level. Unfortunately, they have no intention of going back to that level. We say that because the $900 billion balance sheet was responsible for the dotcom bubble and a reflection of an easy monetary policy that created the real estate bubble. At this stage of the game, it appears that the Fed would be happy to get their balance sheet to the $3 trillion range.
