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

The current US Debt stands at 19 trillion dollars which has been steadily increasing due to expansionary fiscal policy and out of which 34% of gross national debt is due for repayment. Given the size of the US economy at 20 trillion dollar and above the debt is comparatively higher and thus Fed needs to resuce its gross national debt by refinancing its debt, increasing taxes and duties, rationalisation of government spending else the US economy can face serious implications like recession and stagnant growth.