The Federal Reserve Policy Just Crashed Into a BRIC Wall

The Federal Reserve's plan of QT (quantitative tightening) to withdraw $1 trillion this year in liquidity has crashed into a BRIC wall.

The Federal Reserve has shrunken in 2018 its balance sheet by $116 billion. It seems like a lot of money, but it's not when we see a broader picture of what happens around us.

federal reserve

Emerging market currencies have been affected by the Fed's policy. The little drop on the image above has had an impact on the emerging market meltdown ranging from Turkey to Brazil, to South Africa.

emerging markets

The Federal Reserve has shrunken its balance sheet only by less than 3%. Despite that measly, small change, the emerging markets experienced a viral shake-up.

The Federal Reserve may quickly decide to resign from its intended interest rate hikes this year as well as its QT (quantitative tightening) program as the deflationary threat in emerging markets which later seeps into the US may be too unpleasant to the Fed.

It will lead the Fed's future policy to unleash a stronger inflationary pressure, wake up inflation hedges, and start pulling the $USD to drop like a stone.

Peace, Love, Freedom, The Austrian School of Economics, And The Free Market!


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