On the QT

It’s no secret, the Federal Reserve says it’s time for quantitative tapering.

Reversing the QE program means the Fed will “run off” its book of assets.

Fed activities are in large measure on the qt. Econometricians argue Fed operations are secret because its moves fundamentally determine the direction of financial risk. If everybody is surprised at the same time, so the argument goes, no one has an advantage to run in front of financial markets, which is something Wall Street wizards do on a regular basis, described as hedging the risk.

The Fed bought toxic assets after the financial crash in 08-09 to form its book of assets. Now it will sell those assets back to its member, TBTF banks, having then caused the financial crisis, and profiting from it at record levels, on the QT, in late order, with virtually no risk.

Since the risk cannot actually be reduced, it is now contained in the form of political risk, forming the gamma-risk dimension. What actualizing the risk can be attributed to is then a matter of public opinion, which effectively limits the liability associated with causing detriment (the empirical value of toxic assets, with a value of about $4 trillion, for example) to playing politics.

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About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
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