At its latest FOMC meeting, the Fed discussed the ampleness of $6 trillion. 
Increasing Definition of Ample
In January of 2007, prior to the Great Recession, the Fed’s total balance sheet was under $875 billion. And the Fed held no mortgage backed securities (MBS). That was considered ample.
January 2007 Ample
- Total: 0.9 Trillion
- US Treasuries: 0.8 Trillion
- MBS: 0.0 Trillion
In the wake of the Great Recession, the Fed embarked on multiple rounds of QE to artificially force down interest rates.
Then Fed Chair Ben Bernanke said the Fed would wind its balance sheet down. I commented that would never happen.
In multiple rounds of QE, the Fed’s balance sheet exploded.
Pre-Covid Panic Balance Sheet
- Total: 4.2 Trillion
- US Treasuries: 2.5 Trillion
- MBS: 1.4 Trillion.
That was the “new” ample. Now we are discussing a post-Covid measure of ample.
Quantitative Tightening
Since 2022, the Fed has been winding down its balance sheet in a process known as quantitative tightening.
Earlier this year, the Fed slowed the pace by reducing the amount of bond holdings it lets roll off every month.
Current Balance Sheet
- Total: 6.6 Trillion
- US Treasuries: 4.2 Trillion
- MBS: 2.1Trillion
Is that Ample?
Please consider Minutes of the Federal Open Market Committee September 16–17, 2025
Several participants remarked on issues related to the Federal Reserve’s balance sheet and implementation of monetary policy. A few participants stated that balance sheet reduction had proceeded smoothly thus far and that various indicators pointed to reserves remaining abundant. Nevertheless, with [bank] reserves declining and expected to decline further, they noted that it was important to continue to monitor money market conditions closely and evaluate how close reserves were to their ample level.
If balance sheet runoff were to continue at the current pace, the System Open Market Account (SOMA) portfolio was expected to decline to just over $6 trillion by the end of March.
Debate Over Balance Sheet Runoff Intensifies
Bloomberg reports Fed Minutes Show Debate Over Balance Sheet Runoff Intensifies
Several participants at the Federal Reserve’s September policy meeting said it was important to continue monitoring money-market conditions and evaluate how close bank reserves are to their “ample” level, as the central bank continues to unwind its massive portfolio of securities.
The remarks come as prolonged funding pressures in US money markets, just as bank reserves held at the Fed are dwindling, are suggesting the central bank may be getting closer to ending its balance sheet runoff.
As the Treasury has ramped up debt issuance to rebuild its cash balance following the increase in the debt ceiling in July, it’s draining liquidity from other liabilities on the Fed’s ledger, like the central bank’s overnight reverse repurchase agreement facility and bank reserves.
The flurry of Treasury bill issuance is dragging yields higher across a range of instruments. Interest-rate benchmarks tied to overnight repurchase agreements collateralized by US Treasuries are hovering around the Fed’s interest on reserve balances rate, known as IORB, an indication that higher funding costs are here to stay.
Meanwhile, bank reserves [not to be confused with the Fed’s balance sheet] have been steadily declining, falling below $3 trillion, the lowest level since January, according to the latest data.
Fed Chair Jerome Powell said last month bank reserve balances are still “abundant” and have yet to reach the minimum level needed to cushion against market disruptions, though he acknowledged they’re getting closer. Fed Governor Christopher Waller earlier estimated that level — known as ample — at $2.7 trillion.
Still, central bank officials appear divided on how much the Fed should tighten its balance sheet. Fed Vice Chair for Supervision Michelle Bowman said at the end of September the Fed should seek to achieve the smallest balance sheet possible, with reserve balances at a level closer to scarce than ample. That’s in contrast with Powell, Remache and others who have suggested that the runoff should end once reserves are near ample, likely by the end of this year
Functioning Levels
Apparently, the Fed now needs ~6 trillion on its balance sheet, and banks need ~3 trillion in reserves to function.
Bear in mind, the Fed reduced reserve requirements on consumer deposits to zero.
Policy Mistakes
Please see my post Fed Interest Rate and QE Policy Mistakes in Pictures and Silly Fed Comments
When you are clueless about inflation you cannot possibly get policy right. The tendency is to overshoot in both directions creating asset bubbles of increasing amplitude over time.
Free Money
The Fed is paying banks interest on reserves (about 3.3 trillion as of August) at the ongoing rate which is currently 4.1 percent.
4.1 percent of 3.3 trillion is 135,300,000,000. That’s $135 billion in free money annually to banks at taxpayer expense.
Is that ample or what?
This of course is not ample, but asinine. And it’s one of the reasons why I am openly campaigning to be the next Fed Chair.
I Officially Announce my Availability to Become the Next Fed Chair
Please consider my July 9, 2025 post I Officially Announce my Availability to Become the Next Fed Chair
Trump considers naming the next Fed Chair early. I have a fifteen-point plan.
Mish’s 15-Point Fed Plan
- Explain to the nation why we don’t need a Fed and how independent central banks have created boom-bust cycles of increasing amplitude over time. The main corollary is history shows the one thing worse than independent central banks is a central bank run by politicians, frequently ending in hyperinflation.
- Surround myself with qualified insiders who understand the Fed but also believe in the mission to end the Fed.
- Stop paying interest on reserves, phased in over 18 months.
- Wind down the Fed’s balance sheet totally in 2-3 years.
- Require that assets available on demand such as checking and savings accounts are truly available on demand. That means demand deposits are parked in overnight US treasuries. This would be phased in over two years. As a result, we would have genuine safekeeping banks.
Click on the preceding link for the rest of my plan. Essentially, I intend to wind down the Fed orderly, then fire myself.
I’ll vote for you! Oh wait, never mind…
“And it’s one of the reasons why I am openly campaigning to be the next Fed Chair.”
While we don’t see eye-to-eye on some things, we are sure as hell are locked & loaded on this one. Mish for Fed Chair!!!
I want someone to calculate the amount of interest on reserves the Fed has paid since 2008? It has to be at least $500B and is downright criminal.
So how long does it take the Fed to move from stopping QT to starting QE outside of a recession? They’re already buying $20-50B a month in treasuries from maturing treasuries. The balance sheet runoff slope is next to nothing nowadays.
Even though this post makes my blood boil, I want to thank you for bringing the subject forward. Considering the comment, “That’s $135 billion in free money annually to banks at taxpayer expense.
Is that ample or what?”
No, it is not ample, it is larceny or possibly embezzlement. Consider the Fed is owned by the banks receiving the ‘free money’. Essentially these owner banks are embezzling $135 billion from US taxpayers annually and it shows exactly the drummer the fed heads are taking marching orders from (clue: it is not congress). I would whole heartedly support an investigation into this fraud by the DOJ as the fed has become a criminal enterprise siphoning money from US citizens to the owner banks for no product or service rendered.
For perspective, it works out to roughly $425/person annually.
AI is much more genius than human being.
Quantum computer might solve billions of puzzles in 5 seconds.
Even then, there is no match to the greedy stupid Fed’s mess which is simple and complicated.
Mish, your 15 point plan would lead to deflation, and that’s the far opposite of what the government wants. Personally, I am on board with your plan, as it promotes a return to “sound money”.
You have my vote!
Powell indicates that QT is ending (it had slowed to a crawl). $3 billion was injected last week.
Two 1/4 point interest rate cuts are baked in in October and December which indicates a slowing economy and softening labor market (even with 1.6 million deportations).
Stimulating inflation seems a bit risky, but Trump might throw a hissy fit if the Fed does not capitulate during this time of votes for Fed members.
So we have a clearly accommodating Fed and easing conditions ahead to support another “everything bubble”.
The punchbowl is getting filled! Belly up boys!
The US needs the Fed, though not necessarily for trying to set short rates. Don’t forget they have many other roles in the banking/financial system.
“The Creature from Jekyll Island” describes the formation of the Federal Reserve—very informative
Indeed an informative book and interesting perspective.
Strange that Earl Harley got a tiny piece of the pie…
The Fed has robbed the American people by way of the INFLATION TAX –in 2022 virtually every house jumped $100000 in price due to zero interest rates and housing used as an inflation hedge investment. Housing now via the internet is no longer a local market but a world wide market —the YOUNG family can no longer buy a started home.due to the Federal Reserve Policies.
And builders don’t build starter homes. They squeeze huge homes onto small lots. That way they make the most money, I’m old. I was raised in Brooklyn in a “starter” house with a modest kitchen, a dining room, living room, one bathroom and three bedrooms. For a family of 6, But we did have big back and side yards with lots of space between us and the neighbors.
My father paid somewhere around $10k for our house. Don’t really remember. It was in 1950 or 51. He didn’t have a 4 year college degree and he had the house paid off in just a few years. My mother was a stay at home mom. Sad, but those days are gone.
We can rebuild him
we can make him better, stronger, faster…. adjusted for inflation.
😉
The FED’s technical staff and academia don’t know the difference between a debit from a credit.
Contrary to Powell, banks aren’t conduits between savers and borrowers. Never are the commercial banks intermediaries between pooled savings and borrowers.
From the standpoint of the entire system and the economy (macro-economics), commercial banks never loan out, & can’t loan out, existing funds in any deposit classification (saved or otherwise), or the owner’s equity, or any liability item.
Every time a DFI makes a loan to, or buys securities from, the non-bank public, it creates new money – demand deposits, somewhere in the system. I.e., deposits are the result of lending and not the other way around.
See Dr. Richard Werner’s “Banks Don’t Lend Money”
BANKS DON’T LEND MONEY
This can be demonstrated by examining the differences in the consolidated condition statements for commercial banks, plus the monetary system, for any two points in time. For the commercial banking system, this requires constructing a balance sheet for the system, an income & expense statement for the system, & a simultaneous analysis of the flow of funds in the entire economy.
There’s a big difference between the supply of money and the supply of loan funds (credit). Funds flowing through the nonbanks never leaves the payment’s system, but funds flowing through the nonbanks increase the supply of loanable funds, but not the supply of money (a velocity relationship), and vice versa.
The 2019 repo spike was due to disintermediation of the nonbanks, i.e., raising the remuneration rate on interbank demand deposits held at the Fed higher than short-term interest rates. I.e., a remuneration rate that exceeds all money market wholesale funding rates (which according to the FSRRA of 2006) is illegal.
The problem is that if the FED lowers the remuneration rate on IBDDs to a level below the rate available on short-term treasuries, below NIMs, net interest margins, it will cause the banks to expand credit to its largest creditworthy borrower, and the money supply.
The NBFIs disintermediation continued as the remuneration rate exceeded short-term rates for up to 2 years out in 2011. The economy recovered during the 2013 “taper tantrum” as the FDIC lowered its deposit insurance from unlimited for transaction’s based accounts to $250,000 in Dec. 2012.
The initial payment of interest on IBDDs during the GFC, resulted in dis-intermediation for the NBFIs, an outflow funds or negative cash flow, but left the DFIs unaffected (where the size of the NBFIs shrank by $6.2T while the size of the DFIs grew by $3.6T), and thus exacerbated the depth and duration of the GFC.
I.e., since Roosevelt’s 1933 Banking Act, dis-intermediation is a term that only applies to the non-banks. The NBFIs disintermediation continued as the remuneration rate exceeded short-term rates for up to 2 years out in 2011.
And this Romulan cloaking device (remunerating IBDDs), exceeds the level of short term interest rates which is not supposed to be higher than: “the general level of short-term interest rates” as imposed by the 2006 Financial Services Regulatory Relief Act.
Going “full Zimbabwe” now.
G7 central bank credibility is completely gone.
Is anyone still wondering why gold is going vertical?
ABOLISH.
Six trillion is nowhere near enough.
Sixty trillion would be much better.
Better to be hopelessly indebted than sorry.
Why do they pay interest on reserves? T bills don’t even pay that anymore. Have they always paid interest on reserves? This also seems stimulatory above and beyond govt deficit spending.
Your paragraph on interest paid on reserves to the banks is a real eye-opener. Thanks for the info.
why is China flexing now…could it be because they have finally shaken the US chain on helium?
Arnaud Bertrand
@RnaudBertrand
Here’s a question I know many are wondering about: why did China wait until now to use rare earths as leverage against the US? Why not in the first Trump administration when the US started the trade hostilities? Or when the Biden administration unleashed the chips export controls 3 years ago?
I just watched a fascinating explanation by a Chinese analyst and, unexpectedly, a big part of the explanation is… helium.
I had no idea but as he explains (source here: https://
xiaohongshu.com/discovery/item
/68ea3495000000000303b044?source=webshare&xhsshare=pc_web&xsec_token=CBLZXo_5up3BGAPXAS2CwmEtSVmIyGanbvYPL_ni6nqA0=&xsec_source=pc_share
), all the way until 2022 China imported 95% of its helium and most of it was controlled by the US. Of the world’s ten largest helium producers, four were American companies, and the remaining six all used American technology.
Helium isn’t just a party balloons gas: it has plenty of industrial applications for things such as quantum computing, rocket technology, MRI machines, as a coolant for chip lithography equipment, etc.
In a nutshell what he’s explaining is that with helium the US had an even stronger card to play if China ever used the rare earths card.
This raised huge alarm bells inside China. In an article published in late 2022 in the journal Frontiers in Environmental Science (https://
frontiersin.org/journals/envir
onmental-science/articles/10.3389/fenvs.2022.1028471/full
), several researchers from PetroChina’s Beijing-based Research Institute of Petroleum Exploration and Development stressed that China would be greatly affected if the US imposed a “stranglehold” blockade on helium exports.
So over the past few years there were gigantic efforts in China to break the “helium shackles,” with seven helium extraction facilities going into production, and China also switching imports from the US in favor of imports from friendly countries like Russia.
China’s research ecosystem also went into overdrive to find solutions to the helium dependency issues, with China’s Academy of Sciences awarding its annual 2024 “Outstanding Science and Technology Achievement Prize” to a new helium extraction technology project https://english.casad.cas.cn/newsroom/nc/202502/t20250228_902739.html\
because “these scientific and engineering achievements broke the long-standing monopoly of the US and ensured the security of China’s helium resources”
https://guancha.cn/internation/2024_10_15_751771.shtml
The result: by the end of 2024 China had cut its helium dependence on the US to less than 5%
https://scmp.com/news/china/science/article/3282295/china-quietly-extracting-itself-us-helium-stranglehold-experts-say
The “helium shackles” were broken.
That’s what most people don’t realize: power isn’t about intentions or rhetoric – it’s about what you can actually do. Many wonder why countries almost never retaliate when the US imposes sanctions or export controls. The answer is simple: they can’t. They lack the alternatives, the technology, the supply chains.
China is the first country that systematically worked to eliminate every single pressure point, with humongous efforts. It’s not just helium: it’s chips, energy, telecommunication, pharmaceuticals, etc.
That’s why the rare earth card can finally be played now. Not because China suddenly became aggressive, but because they have developed the capabilities to say “no.”
Last word: as a European, this is both depressing and inspiring. Depressing because it highlights the immense magnitude of the task at hand to become genuinely sovereign and develop our own capabilities to say “no.” Inspiring because China demonstrated that it can actually be done, and relatively fast if we execute competently. Although with the current crop of folks at the helm in Europe, that last part is admittedly a very, very big “if”…
Hmmm
Bailouts
2007-2008 – 0.89 trillion
2020 COVID + pre-COVID – 7 trillion
problems started before COVID who knows COVID may have been partial cover.
Next bailout 2026-2027? 54 trillion
what will they use to cover this?
I remember reading that Covid was a cover for something that happened in the financial markets in the Fall of 2019. Don’t remember the details.
January 2007 Ample
Total: 0.9 Trillion
US Treasuries: 0.8 Trillion
MBS: 0.0 Trillion
So it appears as though the “Great Recession” gave them the excuse to Print, and Print Away they surely did indeed!
Pre-Covid Panic Balance Sheet
Total: 4.2 Trillion
US Treasuries: 2.5 Trillion
MBS: 1.4 Trillion.
So the excuse to Print was very costly, perfectly timed, and aligned with the invention of Covid to arise, Hmm…
Current Balance Sheet
Total: 6.6 Trillion
US Treasuries: 4.2 Trillion
MBS: 2.1Trillion
I see, and heard, and still hear it was “Covid’s Fault” but looking at this timeline, it appears more to be the Fault of “Over Printing” (as usual), and Covid was either the (invented?) excuse used to look past all the Printing and/or the excuse used to have it now grow up to 6 Trillion, if you didn’t connect the initial dots?
Whatever/However it has worked out, it seems to me things could have possibly been done to “Orchestrate” this event, and it got away from them, and ended up kicking everyone in the teeth!!
I am not big on conspiracy theories, unless there is evidence or a sequence of events, that would warrant me being so. In this case, and the way you laid it out, it seems very odd to me how this all occurred, and even more perplexing when you toss in the timing and appearance of Covid.
I simply have a whole lot more questions about this timeline, and if it was invented to occur, or just happened to hit us so perfectly as laid out. I am also not a strong believer in coincidences, such as this one. Too perfect of timing, too perfect in execution, and far too many people and organizations walking away with “Far Too Much Cash”!!!
Think the printing was trump and congress to cover shut down. Then biden and congress for the second half
Too much of it by Both, I agree.
Q) Where is the money going to come from, to bring things back into order or some semblance of it anyway? Can’t keep Printing?.
Where will the Banks get the money, if too many need it, or chaos hits? Families behind in Mortgages and/or Autos? States and Specifically CA. And NY who are both drowning in debt?
The Fed saved the banks. JPM will invest $1.5T in essential industries. Other banks will followed suit, instead of parking in the Fed.
Isn’t it the US Congress that saved the banks?
I seem to remember the Fed going to the Congress with their hair on fire, begging for immediate approval (if not sooner).
Folks keep forgetting that the Congress is the entity that spends money it does not have.
Bush (W), Bernanke, Paulson, Geithner, and Blair.
Lisa: Bernanke Regulatory Relief Act of 2006 effective Oct 2011 was hurried. In Oct 2008 financial crisis TARF bazooka save AIG and took over Fannie, Freddie and Lehman.
Begging, demanding…whatever one’s perspective, they got the job done!
Bessent said on Monday, adding, “Maybe there is some Leninist business model
====
mor11on decided to be cute and mentioned some kind of Leninist business model !
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actually during Lenin times before death Lenin installed NEP (new economical policy) that pulled USSR from 1917 revolution results, and made ruble strong!
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it was Stalin and Politburo who dismantled NEP after 1925 .. it was political issue!
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they could not stand fact that rich/ well off people appeared again in communist USSR after revolution !
actually Lenin was quite proficient in economics! esp on affect of inflation or faults of capitalistic system!
my favorite- The last capitalist we hang shall be the one who sold us the rope.
alx
Communism isn’t about territory. Communism is about spreading it’s ideology: destroy the west and capitalism. Islam creed is to spread Islam all over the world. GB, France, Spain and Belgium stop their advance in Africa and in Spain. The evil colonialists invaded their countries made them poor. They want to punish the colonialists, take their land and spread Islam all over the world. They open a small Halal store, Muslims are moving in to buy Halal food. They build mosques and call for prayers 5 times/day. They build close enclaves. The natives leave. They metastasize. Sharm El Sheikh Peace Conference was an attempt to save the Europeans from the Free Palestine bubble. The radical left, which tries to destroy the west and capitalism fuse with them. When Islam takes over Mamdani will throw LBGT from high rise buildings roofs and destroy those useful idiots. Mamdani Islamic police wouldn’t respond to about abused women. Women have vaginas that produce Islamic soldiers.
Now this is what I call a schizo post!
Lenin absolutely had the correct idea for his time and context. The economy he was setting up was ironically going to look like Europe’s stronger economies today. Coupled with Russian resources and investment and they probably could have been way more than they ended up being. Bessent doesn’t know this because Bessent couldn’t point out most countries on a labeled map and definitely doesn’t know his history with the way he’s walking America into a second great depression.
It’s sad, the tale of Russia is a strange one that people would be well served to know.
Also, U.S. Treasury Secretary Scott Bessent told the Financial Times that Beijing is trying to damage the global economy with its export controls on rare earths and critical minerals, sending some global supply chains into snarled conditions.
“This is a sign of how weak their economy is, and they want to pull everybody else down with them,” Bessent said on Monday, adding, “Maybe there is some Leninist business model where hurting your customers is a good idea, but they are the largest supplier to the world. If they want to slow down the global economy, they will be hurt the most.”
Bessent added, “They are in the middle of a recession/depression, and they are trying to export their way out of it. The problem is they’re exacerbating their standing in the world.”
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american mo111ron tells GB paper how chin’s economy is weak
====
hey mor11on…
wanna talk about $ 2 trn deficit in USA, your own country?
jesus!!!!!
US Small-Business Optimism Falls to Three-Month Low on Economy
US Small-Business Optimism Falls to Three-Month Low on Economy – Bloomberg
in Weimar republic THEY ALSO STARTED ON THIS TOPIC!
last topic was HOW TO MAKE WHEELBARROW STRONG TO CARRY MONEY TO BUY BREAD!
Interest on reserves enabled the Fed to save the banks and the RE market. After it became legal, in Oct 2008 US treasuries (orange) popped up from $800B and MBS (brown) from zero. UST and MBS saved the econ, the banks and the RE market again during the next crisis, in 2020. UST + MBS are good collateral in the O/N market. If the O/N market clogs ==> the US will have a stroke. Without interest on reserves the Fed has no tools to save the RE market and the banks. FDIC is bs. Your money is gone. U cannot leave the Fed in the hands of a 5Y child !
Bankrupt-u-Bernanke ran out of T-bills to sell during “credit easing” in 2008. The Treasury had to resume its issuing of supplementary financing bills. Then the FED hedged its bet by paying interest on its liabilities, exacerbating the liquidity crisis. I.e., the FED acting as if there was a capital crunch, ala TARP, destroyed the nonbanks.
Five years from now: “and they told me Jerome Powell did this, and Jerome Powell did that… and I said ‘sure, why not’…“
Bernanke was awarded a Nobel Prize for this scheme long before it was unwound, let alone shown that it was able to be unwound. Inflation is far from target yet QT is too stressful so the balance sheet must be ample?
No wonder precious metals are making a historic upward move.
I just saw a trade in the Continuous Contract of $4,182.10 and the market has upward momentum on strong volume.
Gold may have a high specific gravity but it sure know how to appear weightless!
;-).
It should as it’s done this many, many times before…
It’s being driven by declining real rates of interest.
it is not historical yet. it is just caching up on fact THAT USA IS BANKRUPT
,AND 2 TRLN AND MORE DEFICITS ArE HERE to stay 4ever
historical will be 500 , 1000 $ daily up in gold. and we gonna have ones.
sooner or later
A Manipulated Move, would appear closer to the truth, to Me perhaps? A steady climb upwards towards ridiculous heights is typically a precursor to lots of selling. It’s common for this sequence to unfold with Gold crashing due to the level of sales. Soon will appear to be a great time to divest, and it will start, but slowly. As the market movers (High Volume) will ultimately and appear combined, sell, sell, sell… At what will become known as “The Peak” and that will be that.
Hmmmmm.
As debt goes parabolic, gold goes parabolic…
Maybe the global wheels are about to fall off
Nope, Gold Sells for cash to pay off the debt