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Yellen, You’re Nuts (And You Pulled the Pin)
by Karl Denninger
Market-Ticker.org
It’s time to break out the single-malt.
The reason is quite simple: The effective fed-funds rate has been running at 0.15% for a bit now. To “raise rates” to 0.25% the net change in system liquidity required is about 60%.
This is math folks. It’s the reason The Fed has a monstrous balance sheet; they had to in order to influence rates the way they wanted to on the way down. But to reverse that policy you must unwind that which you did in exactly the same sort of fashion.
Yellen says they’re going to keep the “huge” balance sheet until normalization is “well underway.” The problem is that math doesn’t care what you want, it just is. Further, the entirety of the Fed Balance Sheet is not the sum total of systemic liquidity, not by a long shot.
Continue Reading at Market-Ticker.org…
Source: http://silveristhenew.com/2015/12/16/yellen-youre-nuts-and-you-pulled-the-pin/
