The Fed & the PBOC



What is happening with the Fed’s balance sheet? It is expanding under QE-2.0. It rose to a record $2.21tn, up $165.8bn since QE-2.0 was announced on November 3, 2010. Over this period, the Fed’s holdings of US Treasuries rose $231.6bn, while its portfolio of other securities (Agency Debt + MBS) declined by $65.8bn. On the liability side of the Fed’s ledger, bank reserves rose $79.0bn over this period, while US Treasury deposits are up $24.7bn.





China’s central bank is the world’s champ among quantitative easers. The Chinese continue to accumulate lots of foreign exchange reserves as they continue to manage the foreign exchange value of their currency. These purchases have not been “sterilized,” i.e., offset by selling domestic assets of the PBOC. As a result, the central bank’s balance sheet continues to grow rapidly and so do the reserves (and loans) of China’s financial institutions.