Comments by "seneca983" (@seneca983) on "Peter Zeihan || Why the Fed Is Shrinking the Balance Sheet" video.

  1. 0:20 As a minor nitpick, even the "normal" monetary policy with interest rate instrument still uses the balance sheet. The way it works in the case of the Fed is that they choose a target for the federal funds rate which is the average rate that with which banks give overnight loans to each other. The Fed then has a bond trader who buys (or sometimes sells) short term government bonds thus creating (or sometimes destroying) new base money and expanding (or sometimes shrinking) the Fed's balance sheet (because these bonds end up on the Fed's balance).
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