3. Dollar devaluation through expansion of the balance sheet even further.
The BoJ balance sheet is about 100% of GDP. The Fed balance sheet is about 30% of GDP. That gives a lot of room to add assets before the US looks anything like Japan in that department.
This balance sheet expansion could happen against a backdrop of stock prices that would otherwise be falling. Expanding the balance sheet through stock purchases allows the Fed to correct the global dollar short squeeze while preventing calamitous stock repricing at the same time.
Nominally, things wouldn't look much different to those in the US. But in real terms, the result would be crushing. It seems, however, that politicians and many voters only consider nominal returns, not real returns.
This is one of the reasons I find it hard to believe people who claim the Fed is "out of ammunition." We're at the level of bazookas now, but the Fed has everything from that to nuclear ICBMs and more to play with courtesy of the dollar's reserve currency status.
If corona turns out worse then anticipated for the US and Trump insist on ending his term on a high stock market in 8 months time, the damage could have already been done.
If the Fed got it up to 100% of GDP (or whatever is considered extreme after this crisis) the status of 'reserve currency' will be in jeopardy.
Being the 'reserve currency' is all there is to the dollar, and the US has successfully leveraged it for more than 50 years.
However, if it comes into question, the collapse of the US will be almost instantaneous.
The ICBM's are for show, no sane person would ever fire them.
3. Dollar devaluation through expansion of the balance sheet even further.
The BoJ balance sheet is about 100% of GDP. The Fed balance sheet is about 30% of GDP. That gives a lot of room to add assets before the US looks anything like Japan in that department.
This balance sheet expansion could happen against a backdrop of stock prices that would otherwise be falling. Expanding the balance sheet through stock purchases allows the Fed to correct the global dollar short squeeze while preventing calamitous stock repricing at the same time.
Nominally, things wouldn't look much different to those in the US. But in real terms, the result would be crushing. It seems, however, that politicians and many voters only consider nominal returns, not real returns.
This is one of the reasons I find it hard to believe people who claim the Fed is "out of ammunition." We're at the level of bazookas now, but the Fed has everything from that to nuclear ICBMs and more to play with courtesy of the dollar's reserve currency status.
https://www.lynalden.com/global-dollar-short-squeeze/