You can’t go home again.That’s the message a high-ranking Federal Reserve official had for a chorus of critics of the central bank’s $4.4 trillion balance sheet and its current monetary operating regime at a Hoover Institution conference last week.
The Fed is stuck with a large balance sheet and a large footprint in the financial markets. It is impossible to reduce the balance sheet without unusually high rates on Congress, a taboo.
The ultimate problem is the Fed thinking that it sets interest rates, it does not, borrowers and depositors set those rates. We have the balance sheet we have because Congress required huge bailouts in 2009. Government bailouts will continue with central banking.
Hence Fintech, Fintech can find the shortest path and skip traditional banking. The bailout Fed is reflected in ATM charges, typically 1.5% for the ad hoc agent. Millennials will be hit, and hit hard. The one lesson for millennials, vote for less government all around, otherwise you end up paying the larger taxes while others get the benefits.
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