A few days ago, Fed Chair Jerome Powell spelled out his view of the "Material Adverse Event" doctrine.
This was the idea put forth by Chair Yellen that the bloodletting of Fed balance sheet "normalization" would continue until morale got worse.
I first recognized the importance of this phrase in a piece I wrote singing Yellen's praises back in October of last year, just after the Fed made balance sheet bloodletting the official policy of the Fed.
I noted in the piece that Bernanke had left Yellen with the albatross of QE and a bloated Fed balance sheet that he thought would never be reduced back to normal levels.
That's because it ultimately would cause chaos in the financial markets to do so. Bernanke thought that permanent easy money would be his legacy.
But Yellen, to her eternal credit, chose to take those excess reserves out of the system and to begin returning the right to earn interest on their savings to the hard-working and thrifty savers who justly deserve it.
She also tried to hide the toughest part of the new policy, the fact that the Fed's systemic extinguishment of money in the banking system would be on autopilot.
Let's take a look at all this in a little more detail...
About the Author
Financial Analyst, 50-year charting expert, finance + real estate pro, and market analyst; published and edited the Wall Street Examiner since 2000.