The Fed will not be able to shrink its balance sheet in the short term because previous attempts at quantitative tightening in late 2015 caused repo market problems; longer-term balance sheet reduction would require banking system reforms to reduce required liquidity holdings, which could push liquidity out of banks into markets.
forecastpending
Speaker
Michael HowellEvidence Quote
“In the short term, the answer is no because they tried it once before in late '25. They started to take Fed liquidity down”
Source
Massive Liquidity Shock Coming; Brace For 'Wrecking Ball' Warns Economist | Michael Howell— David LinCreated: 8/12/2026, 6:46:58 PM
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