Question

Since the 2007 financial crisis the Fed’s portfolio of Treasury and mortgage-backed securities has grown tremendously, from $900 to around $4.0 trillion today. In recent years there has been much discussion about how and how quickly the Fed may begin reducing the size of its balance sheet. What is the Fed’s balance sheet? What’s your take? Should the balance sheet be smaller

Answer 1

as any other enterprises balance sheet's FED's balance sheet consist of an assets and liabilities and it can expand thier assets by printing dollars but thier are some practical problems tha printing more money is not good for any economy. every Thrusday, the Fed issues its weekly H.4.1 report, which provides a consodilated statements of the condition of all the fedral reserve banks, in terms of their assets and liabilities.

ASSETS

for which Fed has to pay money, becomes the Fed's asset. so if the Fed pay for waste would becomes its asset.

traditionally the Feds assets consisted with GOVT. SECURITIES and LOAN EXTENDED TO MEMBERS BANK through the repo and discount window.

LIABILTIES

Feds laibilities is that some of your assets, like the green dollars bills in your pocket; the money lying in the reserve account of memebers bank and U.S. depository institutions also forms the part of the Fed,s liabilities.

all of us are connected to the Fed's balance sheet in one way or another. the currency notes that we hold are liabilities of the fed. likewise a partof money in our checking accounts which are kept by banksin their reserve account gets reflected as liabilties of the Feds balance sheet would ultimately ripple down to our lives. we just need to get a better grip for our own good .

no the no the fed's balance sheet should not be smaller the amount of currency in circulation has grown so much that it is n ot possible to shrinkthe balance sheet to its earlier size. this is a good news because it reflects a growing economy. the larger balance sheet also reflects banks wanting to hold more reserves at the Fed.