Economy: Balance Sheet Reduction

April 6, 2022, 2:40 pm EDT

Economy: Balance Sheet Reduction

Everyone should worry if the featured chart is your credit card balance. Fortunately, this is not your debt but it is the US Federal balance. It reached $8.9 trillion today compared to $0.7 trillion in 2002, twenty years ago. In the past two years of Biden’s administration, it made doubled from $4.5 to nearly $9 trillion in two years. Endless spending and countless acts ballooned the debt to a sky-high level. Should we worry about it?

Fed seems to sense the trouble they made so balance sheet reduction is coming to reduce it by $95 billion a month. So, it will take about 4 years to get back to the 2020 level if Fed keeps this speed. What do you think about the US economy for the next four years in this background?

We are suspicious about the Fed’s ability to get it done to reduce to the $4.5 trillion level if it can follow the speed of reduction. Although no one can predict what will happen in the next few years, we know that the financial damage is already done by the US government. There will be no easy solution to solve it without going through a series of painful periods.

Therefore, the investment strategy for the long-term should be geared toward a conservative approach, in our opinion.

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