Is The U.S. Top Bank About To Start A Recession?

America's central bank, the Federal Reserve, can inject cash into the financial sector to prevent breakdowns during emergencies. One way it does so is through the large-scale purchase of bonds. The central bank has racked up nearly $9 trillion in bonds to calm investors during past crises. The Fed is saying it will soon dial back this program. The pace at which the Fed tightens monetary policy may create substantial market headwinds.

Members of the Federal Reserve are debating how quickly to reduce the central bank’s portfolio of bonds, without starting a recession.

Heading into the second quarter of 2022, the balance of Federal Reserve’s assets is almost $9 trillion. The majority of these assets are securitized holdings of government debt and mortgages. Most were purchased to calm investors during the subprime mortgage crisis in 2008 and 2020′s pandemic.

“What’s happened is the balance sheet has become more of a tool of policy.” Roger Ferguson, former vice chairman of the Federal Reserve Board of Governors, told CNBC. “The Federal Reserve is using its balance sheet to drive better outcomes in history.”

The U.S. central bank has long used its power as a lender of last resort to add liquidity to markets during times of distress. When the central bank buys bonds, it can push investors toward riskier assets. The Fed’s policies have boosted U.S. equities despite tough economic conditions for small businesses and ordinary workers.

Kathryn Judge, a professor at Columbia Law, says the Fed’s stimulus is like grease for the gears of the financial system. “If they apply too much grease too frequently, there are concerns that the overall machinery becomes risk-seeking and fragile in alternative ways,” she said to CNBC in an interview.

Analysts believe that the Fed’s choice to raise interest rates in 2022 then quickly reduce the balance sheet could set off a recession as riskier assets are repriced.

Watch the video above to learn more about the recession risks of the Fed’s monetary policies.

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Is The U.S. Top Bank About To Start A Recession?

[sarawilliam]

On a brighter note, every recession comes with an equal chance in the fin-mrkt if you're early informed and equipped, I've read folks amass up to 7 figures  during these times, and even pull it off easily in a favorable economy. Truthfully, I’d need guide please for a boomer like me to attain such amount for retirement, we definitely need to benefit from this situation somehow.

[advancetotabletop]

A weak dollar can signal an economic downturn, making me to ponder on what are the best possible ways to hedge against inflation, and I've overheard people say inflation is a money-eater thus worried about my savings around $200k

[AliceAnderson-inet]

I remember when I just got into crypto back in 2019 but later in 2020 I ended up selling it because I was dumb and I didn't understand it. I studied and learned and now I know how it works. Got back into crypto early in 2023 with 10k and I’m up with 128k in a short period of time .This comment serves as motivation for all those who have invested and continue to invest in cryptocurrencies with so many losses, do not give up, cryptocurrencies can change your life. Do your best to connect with the right people and you will surely see changes.

[Karyabs]

The Federal Reserve is neither federal nor reserve

[BigBoiiLeem]

The biggest problem that I have with the Fed pumping money into the markets is that now these investors - especially the ultra-wealthy - have grown to expect that when things get too hot and the market begins to waver, the Fed will step in and bail everyone out. That's a really dangerous precedent.

We're already seeing the effects of that, where the stock markets are reaching record highs almost every other day, while the actual functional economy of the US is still very much in crisis. That kind of separation between the stock markets and the actual economy is dangerous and unsustainable, and if we're not careful, that will lead to the wholesale destruction of the global economy on a scale that we can scarcely imagine.

[eldridge.wheeler]

This is a scary time for new investors but the best thing you can do is not to make decisions based on emotions. This could actually be a good time to buy more of your high conviction stocks or crypto on a discount. Wealth is created during bear markets, not bull markets. If your portfolio is really effecting your mental health then delete the app and go for a walk. Let the market do its thing and have a long time horizon. I buy and just trade long term more than ever, I have made over 16` btc from day trading with Kathleen Rife in few weeks this is one of the best medium to backup your assets incase it goes bearish

[warrenbuffet]

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."
Thomas Jefferson

[compa_cosmos]

The news report talks about sparking a recession meanwhile they don’t acknowledge that for most of us, we are already facing austerity in our own homes because of inflation. I’d say we shift the conversation from Wall Street as an indicator to how well the average person is doing financially to understand when there is a recession. By that measure, we have probably been in a recession for years now.

[r_kuhl]

'Cryptocurrencies .. are risky, they're not really backed by anything.'
- The Federal Reserve.

[karenpalazzini]

Thanks for this video - I am a high school economics teacher and I like how you have intertwined material taught in an introductory macro class with current events. Spot on. Using it this term in class.

[LeeeroyJenkins]

You ever see the 20 year old that was spoiled their whole life and was protected and then got smacked by the real world. Yea, that's what the government is doing with the economy. Sometimes you have to let go, because the longer you hold on the worse the smack of reality will be.

[georgeharold]

The best way to find that balance between saving and living is by investing. This way you get
to have your saving intact and then live comfortably off the revenue coming in from
your investments. Financial freedom is possible, you just need to know
what to do and when to do it. I am a living testimony.

[globalautobahn]

The federal reserve opened Pandora’s box in 2008-09. And they should have raised rates and rolled off MBS much earlier but they didn’t.

[Myungbean]

While I applaud truthfully addressing the core reason we're facing record inflation...I question why you guys are lying about the balance sheet? There is currently 20.7 trillion dollars in circulation, an increase of 16.7 trillion since the start of the pandemic and almost all of that is QE. Watering down the problem does us no favors.

[mikaxms]

“Crypto is risky because it’s not backed by anything” Somebody should tell this guy the dollar is also no longer backed by anything.

[JA-pnji]

I love how the US says their debts are the safest of safe. That's like me saying my IOUs are the safest of safe because I pay them off with new IOUs.

[JesusGarcia-enpj]

Everyone has an opinion. You do not know what will happen. Sage words of wisdom, “The market will remain erratic longer than you can remain solvent “

[chrismillson]

Banks operate through investing and lending your money while giving you minimal interest rates in return.
Do you know how to avoid this? Do what they are doing and INVEST YOUR MONEY!!

[raybod]

Real inflation is 16%, 11% higher than wage increases. That means people are 11% poorer than a year ago. That should tell everyone our economy is done. Creating 9 trillion dollars has created 9 trillion dollars of inflation. This money was not used to build U.S. businesses and overall economy. It was used to prop up stock prices.

[MushieDetails]

When she said "central banks are needed for accountability and oversight" 😂😂😂 the federal reserve is a national bank that is used bail out failing banks that are being extremely risky because they have a guaranteed bailout. America is