The Fed is doing what exactly?

Instead of reducing the balance sheet from its peak of $4.5 trillion to $2.5 trillion or so as some Fed officials indicated, the impact could be far less — perhaps, some suggest, to $3.5 trillion or even a little more.It all depends on how tight financial markets get. Tightening in the money markets, and an unexpected push of the fed funds rate toward the high end of its target range, would be key factors in prompting the Fed to re-examine its policy normalization efforts from financial crisis extremes.

Claims Jeff Cox at Yahoo 

"There is a very active debate, and it's probably really going to take hold at the August meeting, about how far the balance sheet contraction should really go," said Fed expert Lou Crandall, chief economist at research service Wrightson ICAP."It's easy to get breathless about this and say the Fed's got a crisis. On the other hand, this is revealing that there are fewer truly surplus reserves in the system than we might have thought," he added.

Italy, emerging markets and Repub deficits are the cause.   Dollars have become the permanent reserve currency. This means the Fed is stuck, in crisis and the US will carry the American zombie companies.

Free trade won't work, pricing in the US will be erratic when the currency instead prices foreign exports.