Fed Discount Window Weekly Update
This week’s Primary Credit activity at the Fed’s Discount Window:
This week’s primary credit balance was $1.6 billion, up from $1.5 billion a week ago.
We believe that the Fed will put its Fed Funds rate on a path to zero percent. Such a Fed policy move will help re-inflate the debt security investment portfolios of the big banks, namely BofA, which had over $100 billion of unrealized losses across its Treasury and Agency security investment portfolio at the end of the June 2024 quarter (HERE). The risk to easing monetary policy now is that price inflation may accelerate (3.2% Core CPI as of 8/31/2024).
Expansionary monetary policy unrelated to productivity growth can only result in Dollar devaluation. The Fed was never serious about stopping price inflation, it simply wanted to prevent hyperinflation. A 3-4% Core CPI level will enable the Fed to inflate the debt away. Meanwhile, America’s middle class will be further hollowed out under the false promise of MMT (Yes, debt does matter. Debt and fiscal deficits are the reason why the U.S. has suffered price inflation that is far worse than CPI’s understated numbers. Were the U.S. not able to print at will, price inflation / Dollar devaluation would not be a problem, not even a minor one).
