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ProShares UltraShort 20+ Year Treasury Message Board

  • dooperkiller dooperkiller Feb 26, 2013 5:04 PM Flag

    Hey Ben, what if the FED RES can not Exit?

    Bernanke spent a substantial portion of his prepared remarks, along with Q&A time, addressing these risks. As the its balance sheet has ballooned to more than $3 trillion, the Fed’s critics have raised the issue of its exit strategy, noting the central bank may distort market and set the stage for runaway inflation. Bernanke was aggressive on this issue:

    “We don’t anticipate having to do that [liquidate a big portion of the Fed's holdings]. […] We could exit without ever selling, by letting it run off and we could tighten policy by raising [the] interest rates that we pay on reserves. That would be one strategy, for example. At any case, we have said we will sell slowly with lots of notice and we will, of course, be offering our forward guidance about rates so that there will not be a shift in rate expectations on the part of the market. […] There is no risk-free approach to this situation. The risk of not doing anything is severe as well. So, we are trying to balance these things as best we can.

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