The Fed Has Initiated Operation SNAIL Foundation for Economic Education. The big news from Janet Yellens recent press conference, which was hardly news at all to those who have followed the Feds past announcements, was that Fed officials, having long promised to eventually undo much if not all of the vast balance sheet growth brought about by the Feds various QE operations, and having delayed paying the piper for as long as pressure from without permitted, are finally about to get started. But dont imagine that Fed staff have been idle during the long delay. On the contrary they spent much of it developing their highly scientific balance sheet reduction strategy, first revealed back in June. As the Fed doesnt seem to have given that highly scientific plan a name, I hope I may take the liberty of proposing one. Lets call it Operation SNAIL. In case you havent guessed, the acronym stands for Stall Now And Inch along Later. Activation Corel Graphic Key Suite. For if theres any clear point to the strategy the Fed has chosen, its to shrink as slowly as possible more slowly, even, than it would if it merely allowed maturing assets to passively roll off its balance sheet. Crack Game Snail Mail' title='Crack Game Snail Mail' />A purely passive unwind would, to be sure, have been problematic, for it would have meant slimming down at a very uneven pace, with bunches of assets rolling off the Feds balance sheet during some intervals, and relatively few rolling off in others. The Fed has chosen to address only the first of these problems, by placing varying limits or caps on the value of assets it will allow to roll off its balance sheet during any particular month. Starting in October with maximum roll offs of 6 billion in Treasuries and 4 billion in MBS, it plans to increase the caps by those same amounts every three months for a year, after which theyll remain fixed at 3. Treasury securities and 2. MBS. Whenever the value of maturing assets of either sort exceeds its assigned cap, the Fed plans to reinvest the difference. Following this plan, it will take until sometime in 2. Fed to slim down from its current 4. Its a diet of sorts, to be sure. But then, so is skipping the cheesecake now and then. In his Econbrowser blog post on the subject, James Hamilton illustrates the progress of the Feds unwind in several nice charts, including the one reproduced below. Besides showing the slow pace of the unwind, the chart also shows that 3 trillion or so is as low as the Fed is likely to go by the end of 2. In comparison, were the Fed committed to getting its balance sheet back on its pre crisis trajectory by the end of 2. Why So Slow Why So Little Were the Feds plan the only way for it to achieve a smooth unwind, its snail like pace might be justified. But it isnt the Fed might easily have provided for a smooth unwind, at a faster pace, by combining higher roll off caps with occasional active asset sales during low roll off periods. Such changes as would make all that extra cash unnecessary are neither revolutionary nor difficult to implement. And what about the limited extent of its planned dietHamilton argues, correctly, that so long as the Fed sticks to its present operating framework, the volume of reverse repos it conducts, as well as the value of Treasury balances held with it, will remain highly volatile, and that it will take a lot of reserves sloshing around the system to cover that kind of variation. However, as Hamilton also notes, such changes as would make all that extra cash unnecessary are neither revolutionary nor difficult to implement. Instead, they consist of things like changing the way it conducts reverse repos, using temporary open market operations to add or withdraw reserves as needed to offset changes in the Treasury balance, or moving to a true corridor system for controlling interest rates my emphasis. Hamiltons last suggestion brings us to the true crux of the matter, which is that, despite all its talk of normalization, which to the general public means getting back to its pre crisis ways, the Fed has no intention of normalizing its operating procedures. That is, it doesnt plan to return to its pre crisis, zero IOER corridor system, or to any other sort of corridor arrangement. In case you havent guessed, the acronym stands for Stall Now And Inchalong Later. For if theres any clear point to the strategy the Fed has chosen, its to. Dear Work Coach, Im from Taiwan. My background is engineering. Currently Im stuck in the waiting game after 2nd interview. Instead, it wants to keep the leaky floor type system it introduced in October 2. In a floor system, banks are kept flush with excess reserves, and monetary control is exercised, not by adjusting the quantity of reserves so as to achieve a particular equilibrium federal funds rate, but by manipulating the interest rate the Fed pays on banks required and excess reserves holdings, alone or along with the Feds overnight reverse repo ON RRP rate. Because an abundant supply of excess bank reserves is a necessary feature of any floor type operating system, the Feds decision to retain such a system is the proximate reason why its planning to stay pudgy. Budget Maximizing Bureaucrats. I wrote proximate because the question remains why is the Fed so hung up on its post crisis floor systemIf you think the answer is Because it allows for improved monetary control, kindly let me know your address and hat size so I can mail you a dunce cap. For far from it being the case that the Feds new operating system has proven its worth as a means of overall monetary control, it is largely owing to that system that the Fed has failed for the better part of six years now to hit its two percent inflation target. If successful monetary control isnt the Feds first priority, what is If that failure strikes you as inconsequential, or even desirable, consider that its cause a flawed monetary transmission mechanism that lacks the usual link between growth in the stock of bank reserves on one hand and growth in the broad money stock on the other poses the grave risk of a far more spectacular failure the next time we face a substantial decline in the velocity of broad money like the one that struck in 2. And if you dont believe that, consider that the Feds moneyless Portfoli O Matic transmission mechanism has already had one stress test the one administered between late 2. NGDP growth, or far fewer than were required to restore that growth to its pre crisis path. If successful monetary control isnt the Feds first priority, what is In a word, fatness itself. That is, the Fed likes having a big balance sheet for the same reason that bureaucracies generally like having big budgets to play with. A big budget translates into more generous salaries, lavish facilities, and, other perks. Most importantly, it enhances to the Feds prestige. And if you dont think Fed officials care about prestige, you may be entitled to a second dunce cap, because they care very much indeed. According to someone I know who was part of the Feds deliberations at the time but who prefers to remain anonymous for now, the prestige of the central bank was the answer he was given when he wondered out loud, before a gaggle of top Fed officials in the 1. Fed had to lose by dispensing with reserve requirements, as central banks in most other advanced economies had already done by then. It was chiefly owing to this desire to maintain its prestige that the Fed sought then, and has sought ever since, a means by which to make up for the erosion of demand for its liabilities caused by banks resort to sweep accounts. How to Mail Beer Across the Country Like a Pro. I really like beer. No, I really like beer. That means Im constantly on the hunt for beers I cant get in my current hometown of San Francisco and broker deals with buddies to mail me goods from across the country in exchange for sending them a few bottles of local stuff from the west coast. Over the course of the past decade, Ive probably mailed 1. United States. Of all those shipments, Ive only had one mishap a crushed can that managed to slowly explode and soak a box. Luckily for me, and the recipient of the box that happened to be a friend of mine, the beer soaked box was still delivered, although a few weeks later than planned my guess being so it could dry and still, you know, be a box. In contrast, Ive had a number of boxes sent to me with broken beer the saddest thing in the world inside. Through all those packages Ive come up with a few tips for success. Line Your Box with a Garbage Bag. Accidents happen. What you dont want to happen is for a small accident like a crushed can or broken bottle to soak your box, cause it to break, and result in a whole box of lost items. For that, I recommend lining your box first just as if you were putting it in a garbage can with a plastic garbage bag. Sure, its not unstoppable, but it gives you an extra line of defense in case the worst happens. Also, a plastic bag means that if the box does get soaked it will be harder for individual bottles to fall out. Some beer trading message boards also recommend using a smaller box inside a box when you mail beer. Ive never tried that personally or had it done with beer sent to me, but if you happen to have two similarly sized boxes available, it wouldnt be the worst idea. Line the Sides of Your Box with Bubble Wrap. Since I do this a lot, I have a TON of bubble wrap readily available in my house. If you dont, then using crumpled up newspaper or packing peanuts can have the same effect. The goal is to have a line of defense around the sides and bottom and top of your box. This box is absolutely going to get tossed around. Dont let your beer be right up against the sides. Wrap Individual Bottles with Bubble Wrap or Newspaper. Of the few dozen broken packages Ive gotten over time, the majority of them happened because someone didnt wrap each bottle in its own. DO NOT just put a 6 pack in a box and mail it to someone. It will break. The person you sent it to will hate you. The mailman will hate you. Its a waste of good beer. Dont be that guy. The place where bottles are going to break is at the neck. Wrap the heck out of it and the whole bottle. Connection String Sql Server Express Edition more. The best way to do this is with a lot of bubble wrap secured with a rubber band. If you dont have bubble wrap, then you need something thats going to keep the neck of the bottle protected. Think to yourself If I dropped this on the floor, would it break If the answer is yes or maybe, then you need to wrap it better. Seriously. If Im mailing 1. I sometimes pack them in freezer bags as well. It doubles up the water protection, and I can shove a lot of newspaper in the bag as an extra layer of protection. If youre really fancy, you can buy these sleeves made for wine that will keep individual bottles secure. Eufrat In The Shower there. There are also a lot of styrofoam setups for mailing wine. Theyre a bit pricey IMO for a one time shipment, but if youre trading regularly with the same friend then they could be a good investment and something you could use over and over again to send back and forth. Keep It Tight. When you seal the box up, you want to make sure nothing is moving inside. When stacking bottles I recommend going top to bottom. So the top of one bottle is next to the bottom of another and packing them on their side, not up and down. Ideally, you want to have an additional layer of protection not just the bubble wrap surrounding the bottles between each bottle. That busted can incident I mentioned earlier It came from me thinking Oh, a can wont break and putting it next to a bottle that crushed it mid journey. Dont be me. Before you seal the top, give the box a little shake and make sure theres no movement. If there is, stuff some more bubble wrapnewspaper in there. Protect those cans just like bottles, and think about situations where they might get crushed. Tape Every Part of the Box. Beer is heavy. Its best to just presume that your box isnt going to make it and reinforce it with tape. Im not saying cover the box with tape, but make sure to reinforce the seals at the top and bottom of the box with tape in case the glue gives out while its being tossed around. Dont Mail Beer in the Summer. Heat is bad news for beer and the summer is hot. At some point of your boxs journey or most of it, its going to be sitting in a hot warehouse or on a hot truck. Thats going to hurt your beer. Save your beer trading for autumn and winter when the temperatures are cool, your beer and its recipient will appreciate it. Know the Rules. USPS doesnt allow you to mail alcohol. USPS flat rate boxes are pretty great, and let you mail anything you can fit in a box across the country in two days for not a ton of cash. I will let you use that information how youd like. Heres a rundown on what you need to do to mail alcohol using traditional shipping services. Inform yourself before you show up with a box, not after.