vit_r

So: we usually don’t think of it this way, but the Fed can be seen simply as one of many players in the financial market. It’s a very big player, but not that big compared with the market as a whole — the Fed has roughly $800 billion each of assets and liabilities, in a $50 trillion credit market. And conventional monetary policy consists, basically, of enlarging or contracting the Fed’s balance sheet. Why does the size of a financial player constituting less than 2 percent of the credit market matter?

The humbling of the Fed (wonkish)