It’s Time For The Fed To Shrink Its Balance Sheet

Mar 12, 2017

Norbert Michel , Contributor

I follow the evolution and devolution of monetary and financial policy .

Opinions expressed by Forbes Contributors are their own.

A new debate is heating up over whether the Federal Reserve should continue holding on to all those assets it purchased after the 2008 crisis.

Last year, at the Fed’s annual fly-fishing conference in Jackson Hole, Wyo., central bankers debated “the optimal long-run size of the Fed’s balance sheet.” Former Fed Chairman Ben Bernanke sided with those who want to keep the Fed’s balance sheet abnormally large, relative to its pre-crisis size.

Last month, St. Louis Federal Reserve Vice President David Andolfatto added his own reasons for keeping the larger balance sheet.

But Professor Larry White, blogging at Alt-M, has two excellent posts making the counter arguments. As he points out: “We cannot…