Fed's Bullard Says Balance Sheet Higher Than It Should Be

The video discusses the Federal Reserve's balance sheet, which stands at $4.5 trillion, and the potential market volatility associated with its reduction. It suggests that the balance sheet is larger than necessary and proposes a gradual reduction to create policy space for future quantitative easing. The video also explores what a reasonable balance sheet size might be, considering pre-crisis levels and current cash reserves. The aim is to reduce the balance sheet to around $2 trillion over several years without causing market disruption.

What is the current size of the Fed's balance sheet as mentioned in the video?

• $4.5 trillion

• $1.7 trillion

• $800 billion

• $2 trillion

Why is it important to reduce the Fed's balance sheet according to the video?

• To increase market volatility

• To create policy space for future quantitative easing

• To decrease interest rates

• To increase inflation

What is one method suggested for reducing the balance sheet?

• Selling all assets immediately

• Increasing interest rates

• Increasing the balance sheet size

• Ending the reinvestment policy

What was the approximate size of the Fed's balance sheet before the crisis?

• $2 trillion

• $4.5 trillion

• $800 billion

• $1.7 trillion

What is the suggested target size for the Fed's balance sheet?

• $4.5 trillion

• $1 trillion

• $3 trillion

• $2 trillion