US Federal Reserves’ Balance Sheet Growth!

The US Federal Reserve’s balance sheet growth is increasing amazingly since last year and this thing will not automatically lead to higher inflation as some critic’s fear, a study released on Thursday. There is an outside risk some of the central bank’s credit easing measures to damper the global financial crisis undermines its policy independence, and these things are discussed in the paper, and it will be discussed later on Thursday by Fed Vice Chairman Donald Kohn. So, after observing this discussion now, there is a chance that US may lead their economy in a better way because now things are changing dramatically.

Now there is another major thing which has to be kept in mind and regardless of any other policy choice, interest-rate policy alone determines inflation, discarding criticism the doubling in the Fed’s balance sheet to around $2 trillion will eventually lead prices higher. In a study at the Columbia University economist examines that the track record of the Fed a year after the failure of Lehman Brothers forced it to take unprecedented action to prevent a financial market meltdown.

So, the growth in the Fed’s balance sheet will offset the collapse in demand for US credit after Lehman’s demise. This growth in the Fed’s balance sheet will stop the economy tipping into the type of deflation suffered in Japan, where falling prices led to a decade of stagnation and all these symptoms are showing that now the US will come up form their decades worst crunch in finance and economy and it will lift again on the worlds number 1 strongest part in financial and economical sector!

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