Inflation Huge: Jay Powell Did Blink, But It Had Nothing To Do With ‘Taper’

Bank reserves had been the star of the puppet show. Almost a decade after making the statement, it’s time to go back one more time to the 2011, repo, and FOMC puppet master (Open Market Operations Director) of the time Brian Sack.

MR. SACK. Can I add a comment? In terms of your question about reserves, as I noted in the briefing, we are seeing funding pressures emerge. We are seeing a lot more discussion about the potential need for liquidity facilities. I mentioned in my briefing that the FX swap lines could be used, but we’ve seen discussions of TAF-type facilities in market write-ups. So the liquidity pressures are pretty substantial. And I think it’s worth pointing out that this is all happening with $1.6 trillion of reserves in the system. [emphasis added]

Ten years – TEN! – just think of all the incalculable financial, economic, and now political (see: Chile) damage done in between, and all because of “abundant reserves.”

Reserves have indeed been abundant. But what they have not been is money. There have been ample reserves in Fed policy, it’s just that Federal Reserve monetary policy has for decades been moneyless obsessed with only bank reserves. Jay Powell didn’t come right out and say it last month; he didn’t really have to, at least to anyone paying attention, the evidence has been overwhelming for a very, very long time.

Since hardly anyone has been paying much attention, dazzled by the spectacle of QE “money printing” up bank reserves, this was really was huge. Taper, ha!

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