 All right federal reserve chair Janet Yellen has spoken and what could be her final congressional testimony Let's bring in Danielle DiMartino booth author of fed up and insiders take on why the Federal Reserve is bad for America All right, Daniel We know that the Fed is on track for one more rate hike this year inflation has softened. We've heard that story But I want to say I want to get right to the balance sheet because the Fed Janet Yellen has introduced a new phrase in our New word under our terminology and it's multi-syllabic. Yes. Wow She said the committee currently anticipates reducing the quantity of reserve balances to a level that is Appreciably below recent levels but larger than before the financial crisis. So what is that's a big word for a central banker? appreciably it means like Aggressively, but is that two trillion three trillion where it's four and a half trillion now? So I'm not gonna get get technical on you But the reverse repo facility that they have is capped at two trillion So that is the amount of liquidity that they can inject into the market in times of emergencies They will not shrink the balance sheet below that cap And so that's why you hear the two trillion two and a half trillion dollar figure bandied about because I've seen a lot of analysts Research saying three trillion is the natural level that we're gonna get to I mean look it Whatever it is. It's more money for the Fed to play with It's more money for the Fed to remain an active investor in these markets and and frankly I you know my money today is with the Jamie diamond not Janet Yellen I think that the markets celebrate it today the fact that Jamie diamond has come out basically against quantitative tightening, which is The Fed won't call it quantitative tightening, but it is the exact opposite of quantitative easing So that's what it is and Jamie diamond world's biggest bank. He's come out against it So I think that's what the markets were cheering today. Well, and when you were here a couple months ago You said you didn't even think the Fed would start this unwinding. I don't think they get there I think right now that the markets are saying try me even with all this Even with all this commentary, I don't think the markets believe the Fed I just don't and if they're seeing evidence that Inflation is slowing if they're seeing refinancing activity down 60% year-over-year if they're seeing car sales down for the past six months if they're seeing these data Then they know very well that the economy is slowing So if it's slowing enough to justify them pulling back on rate hikes Then it's gonna be slow enough for them to justify not reducing the balance sheet And Yellen said the balance sheet process would start this year barring that the economy still holds up So she left a disclaimer. Oh my gosh Yes, of course. Well, and she also said that the balance sheet is not an active tool for monetary policy We've heard this before but come on. I mean quantitative easing quantitative easing it is the flows that matter Depending on whether you're talking about treasuries or mortgage-backed securities The Fed is a very active player in these markets 25 to 40 percent net net issuance Every single month the Fed is actively in these markets purchasing just to keep the steady the balance sheet at a steady state, right? It continues to be a form of easing Do you think Yellen gets replaced as I said earlier? It could be this could be her last congressional testimony She said that this could be her last congressional testimony. So she she acknowledged that I think I don't think that this particular administration would Allow a leak of this magnitude as its reference to Gary Cohn to float out there Hmm and for the story headline to say the job is his for the taking if it if there wasn't a lot of credence to it And I think the streets also cheering the potential for him to replace Yellen. Do you think he'd be a good choice? I think he would be a much more rational choice. He certainly understands the banking system He looks through a lot of the statistics that that stop pure academics, you know flat He's he's called out the unemployment rate for being smoke and mirrors in the past and he understands the financial markets as has President Trump So indeed there you go. All right Danielle G. Martinibuth. Thank you for coming back with us. Thank you