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What Is Quantitative Tightening? How Does It Work?

What Is Quantitative Tightening?The main job of a central bank, like the Federal Reserve, is to keep the economy strong through maximum employment and…

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Quantitative tightening is not the opposite of quantitative easing—they are distinctly different activities.

Ballun from Getty Images Signature; Canva

What Is Quantitative Tightening?

The main job of a central bank, like the Federal Reserve, is to keep the economy strong through maximum employment and stable prices. It does this by managing the Fed Funds Rate, which it sets at its Federal Open Market Committee meetings. This effectively raises or lowers the interest rates that banks offer companies and consumers for things like mortgages, student loans, and credit cards.

But when the economy needs help and interest rates are already low, the Fed must turn to other tools in its arsenal. This includes practices like quantitative easing and quantitative tightening; the former expands the shares of Treasury bonds, mortgage-backed securities, and even stocks on the government’s balance sheets, while the latter tightens the monetary supply. Both have a profound effect on liquidity in the financial markets.

The Fed came to the rescue with trillions of dollar’s worth of quantitative easing at the end of the 2007–2008 Financial Crisis, and again during the global Coronavirus pandemic.

But the Fed can’t go on printing money forever. Whenever it employs quantitative easing, the Fed must eventually turn to its counterpart, which is known as quantitative tightening, in order to limit some of the negative outcomes of the former, such as inflation.

How Does Quantitative Tightening Work? What Is an Example of Quantitative Tightening?

Through quantitative tightening, the Federal Reserve reduces its supply of monetary reserves in order to tighten its balance sheet—and it does so simply by letting the bonds and other securities it has purchased reach maturity. When this happens, the Treasury department removes them from its cash balances, and thus the money it has “created” effectively disappears.

Does the Fed know exactly when to ease the gas pedal on quantitative easing? According to the Fed, timing is everything. Remember how the Fed’s main job is to create a strong economy through stable prices and high employment? As it carefully monitors the effects interest rates are having on the economy, it also keeps a close eye on the overall measure of inflation. It’s both a constant battle and a juggle. 

Take the period following the Financial Crisis as an example. The 2007–2008 crisis stemmed in large part from the implosion of collateralized debt obligations, and so the Fed kept the Fed Funds Rate at virtually 0% for almost a decade in order to spur growth and maintain stable rates of employment.

During this period, it also undertook a series of quantitative easing measures, watching its balance sheet balloon from $870 billion in August 2007 to $4.5 trillion in September 2017.

The FRED graph below illustrates how the Fed Funds rate, in blue, remained at nearly zero for the period while the total size of the Fed’s balance sheet, in red, grew. The shaded areas indicate recession.

Federal Reserve Bank of New York, Effective Federal Funds Rate [EFFR], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/EFFR, May 16, 2022.

The Fed believed that as soon as employment became stable, it needed to turn its attention to meeting its 2% inflation target, which it accomplished by raising interest rates. And so, in October 2015, it began gradually increasing the Fed Funds Rate in 25 basis point increments. Over the next several years, rates went up from 0.0%–0.25% levels to 2.25%–2.5% in 2018. This course of action, in the Fed’s words, was known as liftoff.

After raising rates a few times with no disastrous consequences, in 2017 the Fed next embarked on an effort to reduce its balance sheet through quantitative tightening. This was also known as unwinding its balance sheet, because it was taking action in a slow and gradual way.

Between 2017 and 2019, the Fed let about $6 billion of Treasury securities mature and $4 billion of mortgage-backed securities “run off” per month, increasing that amount every quarter until it hit a maximum of $30 billion Treasuries and $20 billion mortgage-backed securities per month. By July 2019, the Fed announced that its unwinding was complete.

The Fed published a blog post detailing these efforts, categorizing them as its “balance sheet normalization program,” since it sought to “return the policy rate to more neutral levels.”

What Effect Does Quantitative Tightening Have on the Economy?

While the goal of quantitative easing is to spur growth, quantitative tightening doesn’t hinder it; in fact, many Governors of the Federal Reserve believe quantitative tightening doesn’t have much effect on the economy at all.

“Quantitative tightening does not have equal and opposite effects from quantitative easing,” said St. Louis Fed President Jim Bullard, “Indeed, one may view the effects of unwinding the balance sheet as relatively minor.”

Former Fed Chair Janet Yellen famously described quantitative tightening as “something that will just run quietly in the background over a number of years,” and that “it’ll be like watching paint dry.”

St. Louis Fed Research Director Chris Waller compared quantitative tightening with “slowly opening the stopper in a drain and letting the water run out,” and by doing so, they were “letting the supply of U.S. Treasuries in the hands of the private sector grow.”

But critics have argued that the excess reserves the Fed creates by “printing money” through quantitative easing have negative consequences on the overall economy. For example, these reserves can lead to currency devaluation and higher inflation, which is defined as when prices rise faster than wages. Inflation can have disastrous effects on an economy, resulting in asset bubbles and even recessions.

Even the Fed admitted as much when St. Louis Vice President Chris Neely noted that between 2008–13, the Fed’s asset purchases led to a decrease in 10-Year Treasury yields by 100–200 basis points. He said, “this reduction modestly raised prices and real activity.”

Just remember that the Fed’s principal aims are to generate stable prices and high employment. So while the Fed hasn’t explicitly said so, reducing its balance sheet might be one of its methods to combat inflation.

Why Is Quantitative Tightening on the Fed’s Agenda Again?

In 2022, inflation reached decades’ high, stemming from a number of factors, including fallout from the global Coronavirus pandemic, which increased labor prices, and Russia’s invasion of Ukraine, which affected energy and commodities. In March, 2020, the Fed slashed the Fed Funds rate to 0.00%–0.25% in response to the pandemic. In May, 2022 it raised rates again by 0.5%.

What Is the Schedule for Quantitative Tightening?

On May 4, 2022, the Fed announced it would be undertaking a “phased approach” of quantitative tightening measures beginning with a 3-month period of unwinding $30 billion of Treasuries and $17.5 billion mortgage-backed securities beginning on June 1, 2022. By September, 2022 these caps would increase to $60 billion and $35 billion, respectively.

Is Quantitative Tightening Really So Frightening?

TheStreet’s Ellen Chang says that, according to economists, inflation is on a downward trend, most likely to decline to 3% by the end of the year, and that higher interest rates as well as quantitative tightening should do what they’re supposed to, and reduce pricing pressure. 

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Repeated COVID-19 Vaccination Weakens Immune System: Study

Repeated COVID-19 Vaccination Weakens Immune System: Study

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Repeated COVID-19…

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Repeated COVID-19 Vaccination Weakens Immune System: Study

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Repeated COVID-19 vaccination weakens the immune system, potentially making people susceptible to life-threatening conditions such as cancer, according to a new study.

A man is given a COVID-19 vaccine in Chelsea, Mass., on Feb. 16, 2021. (Joseph Prezioso/AFP via Getty Images)

Multiple doses of the Pfizer or Moderna COVID-19 vaccines lead to higher levels of antibodies called IgG4, which can provide a protective effect. But a growing body of evidence indicates that the “abnormally high levels” of the immunoglobulin subclass actually make the immune system more susceptible to the COVID-19 spike protein in the vaccines, researchers said in the paper.

They pointed to experiments performed on mice that found multiple boosters on top of the initial COVID-19 vaccination “significantly decreased” protection against both the Delta and Omicron virus variants and testing that found a spike in IgG4 levels after repeat Pfizer vaccination, suggesting immune exhaustion.

Studies have detected higher levels of IgG4 in people who died with COVID-19 when compared to those who recovered and linked the levels with another known determinant of COVID-19-related mortality, the researchers also noted.

A review of the literature also showed that vaccines against HIV, malaria, and pertussis also induce the production of IgG4.

“In sum, COVID-19 epidemiological studies cited in our work plus the failure of HIV, Malaria, and Pertussis vaccines constitute irrefutable evidence demonstrating that an increase in IgG4 levels impairs immune responses,” Alberto Rubio Casillas, a researcher with the biology laboratory at the University of Guadalajara in Mexico and one of the authors of the new paper, told The Epoch Times via email.

The paper was published by the journal Vaccines in May.

Pfizer and Moderna officials didn’t respond to requests for comment.

Both companies utilize messenger RNA (mRNA) technology in their vaccines.

Dr. Robert Malone, who helped invent the technology, said the paper illustrates why he’s been warning about the negative effects of repeated vaccination.

“I warned that more jabs can result in what’s called high zone tolerance, of which the switch to IgG4 is one of the mechanisms. And now we have data that clearly demonstrate that’s occurring in the case of this as well as some other vaccines,” Malone, who wasn’t involved with the study, told The Epoch Times.

So it’s basically validating that this rush to administer and re-administer without having solid data to back those decisions was highly counterproductive and appears to have resulted in a cohort of people that are actually more susceptible to the disease.”

Possible Problems

The weakened immune systems brought about by repeated vaccination could lead to serious problems, including cancer, the researchers said.

Read more here...

Tyler Durden Sat, 06/03/2023 - 22:30

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Study Falsely Linking Hydroxychloroquine To Increased Deaths Frequently Cited Even After Retraction

Study Falsely Linking Hydroxychloroquine To Increased Deaths Frequently Cited Even After Retraction

Authored by Jessie Zhang via Thje Epoch…

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Study Falsely Linking Hydroxychloroquine To Increased Deaths Frequently Cited Even After Retraction

Authored by Jessie Zhang via Thje Epoch Times (emphasis ours),

An Australian and Swedish investigation has found that among the hundreds of COVID-19 research papers that have been withdrawn, a retracted study linking the drug hydroxychloroquine to increased mortality was the most cited paper.

Hydroxychloroquine sulphate tablets. (Memories Over Mocha/Shutterstock)

With 1,360 citations at the time of data extraction, researchers in the field were still referring to the paper “Hydroxychloroquine or chloroquine with or without a macrolide for treatment of COVID-19: a multinational registry analysis” long after it was retracted.

Authors of the analysis involving the University of Wollongong, Linköping University, and Western Sydney Local Health District wrote (pdf) that “most researchers who cite retracted research do not identify that the paper is retracted, even when submitting long after the paper has been withdrawn.”

“This has serious implications for the reliability of published research and the academic literature, which need to be addressed,” they said.

Retraction is the final safeguard against academic error and misconduct, and thus a cornerstone of the entire process of knowledge generation.”

Scientists Question Findings

Over 100 medical professionals wrote an open letter, raising ten major issues with the paper.

These included the fact that there was “no ethics review” and “unusually small reported variances in baseline variables, interventions and outcomes,” as well as “no mention of the countries or hospitals that contributed to the data source and no acknowledgments to their contributions.”

A bottle of Hydroxychloroquine at the Medicine Shoppe in Wilkes-Barre, Pa on March 31, 2020. Some politicians and doctors were sparring over whether to use hydroxychloroquine against the new coronavirus, with many scientists saying the evidence is too thin to recommend it yet. (Mark Moran/The Citizens’ Voice via AP)

Other concerns were that the average daily doses of hydroxychloroquine were higher than the FDA-recommended amounts, which would present skewed results.

They also found that the data that was reportedly from Australian patients did not seem to match data from the Australian government.

Eventually, the study led the World Health Organization to temporarily suspend the trial of hydroxychloroquine on COVID-19 patients and to the UK regulatory body, MHRA, requesting the temporary pause of recruitment into all hydroxychloroquine trials in the UK.

France also changed its national recommendation of the drug in COVID-19 treatments and halted all trials.

Currently, a total of 337 research papers on COVID-19 have been retracted, according to Retraction Watch.

Further retractions are expected as the investigation of proceeds.

Tyler Durden Sat, 06/03/2023 - 17:30

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Complying, Not Defying: Twitter And The EU Censorship Code

Complying, Not Defying: Twitter And The EU Censorship Code

Authored by ‘Robert Kogon’ via The Brownstone Institute,

So, word has it that…

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Complying, Not Defying: Twitter And The EU Censorship Code

Authored by 'Robert Kogon' via The Brownstone Institute,

So, word has it that Twitter has withdrawn from the EU’s Code of Practice on Disinformation, a fact that appears only to be known thanks to a couple of pissy tweets from EU officials. I cannot help but wonder if this is not finally Elon Musk’s response to the question I asked in my article here several weeks ago: namely, how can a self-styled “free-speech absolutist” be part of a “Permanent Task-Force on Disinformation” that is precisely a creation of the EU’s Code?

But does it matter? The answer is no. The withdrawal of Twitter’s signature from the Code is a highly theatrical, but essentially empty gesture, which will undoubtedly serve to shore up Musk’s free speech bad-boy bona fides, but has virtually no practical consequences. 

This is because: (1) as I have discussed in various articles (for instance, here and here), the effect of the EU’s Digital Services Act (DSA) is to render the hitherto ostensibly voluntary commitments undertaken in the Code obligatory for all so-called Very Large Online Platforms (VLOPs) and (2) as discussed here, the European Commission just designated a whole series of entities as VLOPs that were never signatories of the Code.

Twitter is thus in no different a position than Amazon, Apple and Wikipedia, none of which were ever signatories of the Code, but all of which will be expected by the EU to comply with its censorship requirements on the pain of ruinous fines. 

As EU officials like to put it, the DSA transformed the “code of practice” into a code of conduct: i.e. you had better do it or else.

Compliance is thus not a matter of a signature. The proof of the pudding is in the eating. And the fact of the matter is that Musk and Twitter are complying with the EU’s censorship requirements. Much of the programming that has gone into the Twitter algorithm is obviously designed for this very purpose.

What, for instance, are the below lines of code?

They are “safety labels” that have been included in the algorithm to restrict the visibility of alleged “misinformation.” Furthermore – leaving aside the handy “generic misinfo” catch-all – the general categories of “misinformation” used exactly mirror the main areas of concern targeted by the EU in its efforts to “regulate” online speech: “medical misinfo” in the context of the COVID-19 pandemic, “civic misinfo” in the context of issues of electoral integrity, and “crisis misinfo” in the context of the war in Ukraine.

Indeed, as Elon Musk and his lawyers certainly know, the final version of the DSA includes a “crisis response mechanism,” (Art. 36) which is clearly modeled on the European Commission’s initially ad hoc response to the Ukraine crisis and which requires platforms to take special measures to mitigate crisis-related “misinformation.” 

In its January submission to the EU (see reports archive here), in the section devoted precisely to its efforts to combat Ukraine-war-related “misinformation,” Twitter writes (pp. 70-71): 

“We … use a combination of technology and human review to proactively identify misleading information. More than 65% of violative content is surfaced by our automated systems, and the majority of remaining content we enforce on is surfaced through regular monitoring by our internal teams and our work with trusted partners.”

How is this not compliance? Or at least a very vigorous effort to achieve it? And the methodology outlined is presumably used to “enforce on” other types of “mis-“ or “disinformation” as well.

Finally, what is the below notice, which many Twitter users recently received informing them that they are not eligible to participate in Twitter Ads because their account as such has been labeled “organic misinformation?”

Why in the world would Twitter turn away advertising business? The answer is simple and straightforward: because none other than the EU’s Code of Practice on Disinformation requires it to do so in connection with the so-called “demonetization of disinformation.” 

Thus, section II(d-f) of the Code reads:

(d) The Signatories recognise the need to combat the dissemination of harmful Disinformation via advertising messages and services.

(e) Relevant Signatories recognise the need to take granular and tailored action to address Disinformation risks linked to the distribution of online advertising. Actions will be applicable to all online advertising.

(f) Relevant Signatories recognise the importance of implementing policies and processes not to accept remuneration from Disinformation actors, or otherwise promote such accounts and websites.

So, in short, vis-à-vis the EU and its Code, Twitter is complying, not defying. Removing Twitter’s signature from the Code when its signature is no longer required on the Code anyway is not defiance. Among other things, not labeling content and/or users as “misinformation,” not restricting the visibility of content and/or users so labeled, and accepting advertising from whomever has the money to pay would be defiance.

But the EU’s response to such defiance would undoubtedly be something more than tweets. It would be the mobilization of the entire punitive arsenal contained in the DSA and, in particular, the threat or application of the DSA fines of 6 percent of the company’s global turnover.

It is not enough to (symbolically) withdraw from the Code of Practice to defy the EU. Defying the EU would require Twitter to withdraw from the EU altogether.

Tyler Durden Sat, 06/03/2023 - 10:30

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