The Fed would contract its balance sheet by selling interest-bearing Treasury securities back to the public.
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This makes Lake Vostok a place of great scientific interest, because the ice sheet above the lake provides the longest uninterrupted climate record known to exist.
That is, how would the Fed manage to eventually reverse its efforts and sell those assets off its balance sheet without driving interest and bond yields sharply higher, bond prices sharply lower, thus hurting the economy and bond investors?
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As the Italian economy slows, as many expect it will, the ECB may be forced to expand its balance sheet again with interest rate cuts and possibly some form of sovereign bond purchasing, which we ever more ironically refer to as QE.
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All that the Fed really controls is its balance sheet, and the interest rate that it pays on bank reserves.
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Inevitably American Tissue's balance sheet became stretched, making interest payments difficult.
The government has promised to help with a special issuance of Treasury bills which, through the machinations of reserve management, will result in a larger Fed balance sheet but no impact on interest rates.
Fujita has the weakest balance sheet of all, with an interest-rate coverage of 0.8.
Bernanke and several of his central bank colleagues around the world have unleashed a new era of monetary policy, marked by zero-bound nominal interest rates coupled with unprecedented and massive balance sheet expansion.
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To finance the off-balance-sheet assets, the government set deposit interest rates at very low levels: 1% or so.
They worry that low interest rates and the Fed's large balance-sheet could nurture inflation expectations even when unemployment is high.
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The outcome, eventually, was a rule by which a company can keep a special-purpose vehicle off its balance sheet as long as an independent third party owns a controlling equity interest equivalent to at least 3% of the fair value of its assets.
The decision by the Fed to offer emergency liquidity to Bear Stearns and to facilitate its acquisition by JPMorgan Chase had less to do with the size of Bear's balance-sheet than with its central role in markets for credit-default and interest-rate swaps.
According to those minutes, several FOMC members thought the new round of asset purchases and balance sheet expansion might be ended by the end or even before the end of 2013 while interest rates would presumably remain on the floor much longer.
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Japanese financial stocks, as especially the megabanks, have been in a positive feedback loop of balance sheet and income statement translation gains from a weaker yen and the prospect of increased loan volumes and interest earnings from higher domestic loan demand.
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Neither could interest rate cuts coax banks, which are currently re-evaluating risk and keeping a tight grasp on their balance sheet, to be more generous in their lending to house buyers.
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