Can The Fed Keep Raising Rates Amidst A Banking Crisis? | Michael Howell
Inflection Point
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The Reserves of the Banks Are a Key Number on the Fed Balance Sheet
Before this crisis, the Fed was operating bank reserves at about $3 trillion. Since the British guilt crisis in September of last year, that reserve number on the Fed balance sheet has flatlined at $3 trillions. The problem is that once you get a crisis, the demand for reserves goes up. In my view, it's a liquidity easing. And that's what the system wants. Whether it has a big multiplier effect on the economy is a completely different question. But the Federal Reserve has backstopped the system, which is what it's doing very effectively. I think we can dance on the head of a pin."
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