Central Bank Balance Sheets (Assets as a percent of GDP)
Note how the Federal Reserve has suddenly become the laggard of the major central banks currently exercising some form of quantitative easing. Since 2011, the Federal Reserve’s assets as a percent of GDP have actually flattened out. Of course, the out-performance of U.S. GDP growth versus growth in Japan, the eurozone, and the United Kingdom partially the Fed’s lagging position. All else remaining equal, this chart demonstrates that the Fed has a lot of room to continue expanding its balance sheet in an attempt to soften the dollar. Indeed, in a recent discussion with reporters, San Francisco Fed President John Williams (voting FOMC member) reaffirmed that he thinks the Fed should buy at least $600B in bonds during QE3. With U.S. GDP standing at $15,776B, this bond buying represents just another 3.8% of GDP, still well-behind the other major central banks depicted above. Thus, whether the dollar falls over time in the face of this full-court press will likely depend a lot on what happens with growth and QE programs in Japan, the eurozone, and the United Kingdom.
via The Dollar’s Vote Is In And Appears Ready To Run Higher – Seeking Alpha.