Something’s Gonna Break! How Quantitative Tightening (QT) Ends

What are the odds the Fed contracts its balance sheet to $7.5 trillion by the end of 2023?

We’ll bet dollars to doughnuts this never happens. Fed normalization policies are doomed to fail. To put things in perspective, it took 24 months for the Fed to reduce its balance sheet by $800 billion between October 2017 and September 2019 (in the wake of a $3.5 trillion expansion). And this QT program was abruptly ended in repo-madness.

Now it plans to extinguish nearly double the ‘assets’ in 19 months. Something’s bound to break. You can damn near count on it.