The $4.5 Trillion Question

Featuring Julian Brigden

Julian Brigden returns to RealVision to ask the $4.5 trillion question: Can the Federal Reserve successfully reduce its balance sheet? In the context of this period of pause for the US dollar, Julian considers how bond and equity markets will react to the Fed’s unwinding of QE, as he looks ahead to the third and final leg of the dollar’s upward cycle. Filmed on May, 26, 2017.

Published on
1 June, 2017
Financial System, US Dollar, Monetary policy
24 minutes
Asset class
Equities, Currencies, Bonds/Rates/Credit


  • BK

    Brian K.

    30 8 2017 21:36

    1       0

    " As I said I'm very worried that Trump who said 'I don't like rate hikes' will pick a replacement for Yellen who favours BS reduction over rate hikes. It will be a s*** show! " --Why wouldn't Trump pick someone who favors no balance sheet reduction and no rate hikes. I'd think Trump wants to go full Japan.

  • DC

    D C.

    29 8 2017 22:34

    0       0

    Can you detail out more specifically how you calculated the Long term structure of USD supply? That would be very useful. Thanks.

  • MA

    Mitsos A.

    28 6 2017 19:39

    0       0

    Hi Julian. Could you please address your liquidity concerns in the face of the over 2tln in reserves held by the US banking sector? In your view, how does that stock of liquidity factor into any contraction in balance sheet size and why does that not offer some type of buffer for the carry trade and general dollar liquidity over seas?

  • dj

    daniel j.

    19 6 2017 18:00

    0       0


  • LM

    Lars M.

    16 6 2017 12:35

    1       0

    Best IM2 presentation yet. Really got me thinking.

  • DH

    Dale H.

    16 6 2017 01:42

    0       0

    This was very very good. Will watch again - and the earlier one.

  • CA


    14 6 2017 23:48

    3       0

    Julian is one of the best! Thanks.

    Any updates on the Dolar after the FED plan (dovish in my view) to reduce the balance sheet 10B a month (It would take more than 30 years to reduce to 1T!) or 50B /month about 6 years... at this rate we would have the risk off by the economic cycle and recession and not by tightening.

  • DS

    Daisuke S.

    10 6 2017 13:29

    0       0

    Great insight. Happy to watch such a nice one.

  • PT

    Pamela T.

    7 6 2017 03:13

    1       0

    Excellent analysis! Many thanks for sharing!

  • bm

    bill m.

    6 6 2017 01:08

    0       1

    How do I cancel my subscription?
    The videos keep stopping.
    bill mccollough

  • NH

    Neil H.

    5 6 2017 17:38

    6       0

    excellent as always. keep bringing Julian back

  • MS

    Matt S.

    5 6 2017 08:25

    8       0

    Am I the only who finds these new comment sections a bit of a mess? I read them from the bottom up, ie old to new. But by doing so, I am reading replies to comments I haven't even read yet! It's most confusing and awkward and it's hard to distinguish between a main comment and a reply - the little indent does little to help... : \

  • MS

    Matt S.

    5 6 2017 08:14

    1       0

    def one to watch again later! I'm sure it will all make sense by the 6th viewing...... ;)

  • FC

    Fractal C.

    5 6 2017 01:43

    6       0

    Julian, watched your presentation a couple of times over the weekend and here is my question for you. World GDP is about 50 TN dollars. If the world GDP slows down just by 1%, you are likely to see the world needling 500 BN less dollars and alleviating your current account deficit problem. Point I am making is that in a slowing GDP, we are perhaps going to see more QE and slow down of GDP causing Dollar to go down. Your thoughts please?

  • AM

    Artur M.

    4 6 2017 17:31

    0       0

    Dollar strength could also happen on political event in EU before even FED starts to shrink B/S.

    China is approching a singularity momment as is best expressed in virtual currenses or CH interbank rates

    Dollar weeknes could continue on US political chaos, that makes the country go in peices or out right revolution if left continue on the same track.

    And if nothing of that happen well FED may be the catalist but it's not a given that this is the only one.

    Neverless very good presentation. You can't explore all the possibilites/ probabilites in 20 min.
    Anyway next leg in USD will set of the next global panic

  • dj

    daniel j.

    4 6 2017 13:03

    1       0


  • LC

    Liliana C.

    4 6 2017 02:49

    3       0

    Julian is always so thought provoking! Can I marry the man just to hear him all day? Brilliant!!

  • ND

    Nigel D.

    4 6 2017 01:21

    4       0

    My take away is that a shrinking Fed balance sheet will cause turmoil in foreign markets. But where does that capital go?

    During a crisis, capital typically flows into treasuries. Yields dropped during the '08 financial crisis and are declining in today's low growth environment. Does the market put capital into treasuries at a sub-2% yield? Or does it look towards gold or other hard assets? This is the million dollar question.

  • JC

    Joseph C.

    3 6 2017 19:35

    2       0

    Thanks for the thought-provoking video. One thing to consider with the yields going higher after the various QEs is that these moves were well-telegraphed to the market, and so the rates fell noticeably beforehand. What we see is more of a "buy the rumor and sell the fact". However, going into this reinvestment tapering, there seems to be very little selling in tens beforehand so it is unlikely we get a large market rally afterwards.

  • JM

    James M.

    3 6 2017 16:22

    1       0

    Excellent presentation thank you. 1. Is it possible for the FED to play the Japanese game and effectively never reduce the balance sheet or is this unlikely as the hold reserve currency status and the US populace are unlikely to accept the ramifications of such actions as the Japanese have since 1989? 2. If the Saudis except Yaun for oil in the future reneging on the PetroDollar deal to combat their ever decreasing market share(Especially considering Aramco deal) as China is now the biggest buyer of oil and Russia, Iran, Angola, Iraq, and Iran make up an ever greater share of China's demand coupled with the US frackers now supplying a lot of US demand and exports, does this exacerbate the USD liquidity problem?

  • NT

    Nicholas T.

    3 6 2017 14:36

    3       0

    Love Julians analysis here, but to me the takeaway is the Fed cannot and is unlikely to shrink its balance sheet much. I'm curious what probability he is attaching to this dollar spike scenario. To me it's low. I'd see another rise in the dollar to sell it and diversify further out of USD assets.

  • jh

    john h.

    2 6 2017 14:40

    0       0

    Julian, great presentation but it looks like situation could be changing. Would really appreciate your thoughts on this:

  • GS

    Gordon S.

    2 6 2017 02:03

    4       0

    Thanks for the great presentation! I have one general question about where offshore dollars of big American companies are? In what sense are these really offshore? Is Apple for example allowed to buy US treasuries with offshore capital? Are they maybe even “allowed” to buy their own bonds? In the goal to always further reduce taxes, I could very well imagine those companies doing exactly that. If not directly, then at least indirectly? Wouldn’t it make much more sense to lend yourself $100 billion dollars and pay zero taxes (interest doesn’t matter, since you pay yourself), than to repatriate and pay even “only” 10% in taxes? If that were the case, then maybe a repatriation tax plan would be ineffective?

  • EF

    E F.

    2 6 2017 00:17

    0       0

    Great update, how do you rate the chances of China and other big holders accelerating their sale of treasuries if they become bid in your scenario? Isn't it possible they would be interested in selling at a faster and at the same time more orderly manner, happy to offset any fall in yields?

  • GM

    Greg M.

    2 6 2017 00:02

    3       0

    Julian and Daniel Want are two of the smartest thinkers on realvision. Very information packed week!

  • AS

    Alex S.

    1 6 2017 23:27

    12       0

    It's guys like Julian Brigden that makes this website well worth it's pricetag.

    I was fretting about whether or not it was beyond my means to keep my subscription here, but as soon as I saw his face on a recent video I knew I wasn't going to leave ;)

    long live RealVision. it's nice to not be lied to on a relentless basis like you can bet on with conventional media outlets

  • SN

    Sean N.

    1 6 2017 22:11

    9       0

    Amazing summary. Must agree Julian is brilliant... always seems to be 6 months ahead of the curve.

    As well, he's one of the best at bringing together the big picture and laying it out in terms everyone can understand... a true sign of someone who deeply understands what they are talking about.

  • BL

    Bruce L.

    1 6 2017 22:03

    10       0

    "QE is actually nothing more than debasement of the currency"
    Dead right.

  • EH

    Eric H.

    1 6 2017 19:48

    1       0

    very high quality. thx RV & Julian!

  • AB

    Andrew B.

    1 6 2017 19:42

    3       0

    Absolutely brilliant video.

  • BR

    Brian R.

    1 6 2017 19:41

    2       0

    This presentation alone is worth the annual subscription to RVTV. Brilliant and very forward thinking.

  • MC

    Minum C.

    1 6 2017 18:11

    5       0

    An outstanding presentation that brings everything together. Like many others, I am wondering if the Fed is giving us lip service with its shrinking balance sheet comment. They have acted like Lucy and have pulled the ball from under Charlie Brown's feet so many times that it's hard to actually believe what they say anymore. The weird part is they know they have a credibility problem, and it seems they may be willing to solve this problem by raising rates and shrinking the balance sheet regardless of whether it is currently warranted.

  • WE

    William E.

    1 6 2017 18:06

    2       0

    As always Julian...Thank you!

  • RC

    Ronan C.

    1 6 2017 18:02

    7       0

    Clear and articulate delivery of simple concept. One of best presenters on RV!

  • BK

    Brian K.

    1 6 2017 17:56

    1       0

    Wow. Great stuff.

  • DW

    Daniel W.

    1 6 2017 17:03

    3       0

    How would you rate the possibility that FED really reduces its balance sheet in 2017? Below 50%?

  • DM

    Daniel M.

    1 6 2017 17:00

    3       0

    This guy is the best of Real Vision.

  • dd

    darrell d.

    1 6 2017 16:59

    1       0

    Are we suppose to believe the ECB and BoJ rumours of tapper talk? It appears someone somewhere has to be in constants printing mode to keep all these risks plates in the air and spinning. I just don't see Central Bank exit from markets in our lifetime without dislocations.

  • VK

    Viresh K.

    1 6 2017 16:55

    1       0

    Julian is so good.

  • IF

    Ian F.

    1 6 2017 15:57

    5       1

    This guy is spot on re: what QE really was. This was to drive the currency down. Richard Koo was in the midst of those G7 meetings when Bernanke proposed QE2 and said the world objected at the time (ex England). However since the Fed proceeded it allowed for other central banks to now do QE. This was always meant to drive down the currency, and now unfortunately the US is suffering for it.

  • AH

    Andrew H.

    1 6 2017 14:45

    2       0

    One question I do not think was touched upon, is the effect of other central banks printing while the US Fed stays level or contracts? I have to believe this has some effect on US equity and bond markets.

  • PJ

    Peter J.

    1 6 2017 14:25

    6       0

    Hi Julian, great follow up piece, really enjoyed it and will need to re-watch to get all the detail. Will you be following it up at the backend of the year to see where your thinking will be going into 2018, once you know how the rest of 2017 pans out?

  • SJ

    Sophie J.

    1 6 2017 14:11

    2       0

    consistently mind-blowing

  • GH

    Gary H.

    1 6 2017 13:17

    0       0

    Very thought provoking. Thank You

  • RO

    Rodica O.

    1 6 2017 13:09

    2       0

    great work as always Julian !!

  • SA

    Scott A.

    1 6 2017 12:38

    8       0

    Fantastic presentation. Julian has guided me well. However, I am not sure the Fed will ever shrink balance sheet.

  • NY

    Nicolas Y.

    1 6 2017 11:50

    2       0

    This is one of the biggest US economy subject of 2017 imo.

  • MS

    Michiel S.

    1 6 2017 11:29

    1       0

    Thanks Julian, sometimes I need confirmation and now got it again from you! On your side and especially given the fact EUR-USD counts most in USD indexes.

  • PM

    Paul M.

    1 6 2017 11:03

    3       0

    Given this logic, should the FED not reduce its balance sheet, it's a dollar sell. Unfortunately, by the time this will be common knowledge, the USD will be trading at another lvl altogether.

  • JS

    John S.

    1 6 2017 10:55

    10       0

    In a word, Outstanding!

  • FC

    Fractal C.

    1 6 2017 10:54

    18       0

    Basically, IF the Fed starts shrinking the balance sheet. trades are long bonds, short equities and long dollar. Me thinks that the Fed is not going to reduce the balance sheet! In fact, they may do the exact opposite.

  • IB

    Ian B.

    1 6 2017 10:45

    4       0

    Different Class - as per usual...

  • GA

    Giedrius A.

    1 6 2017 10:34

    4       0

    Fantastic presentation. Thank you

  • MN

    Michael N.

    1 6 2017 10:34

    4       0

    very good presentation. thank you