CHART OF THE DAY: Fed's Balance Sheet Hits NEW RECORD $3 Trillion

Up, up and away in my beautiful balloon.
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Details from the WSJ:
Fed’s Balance Sheet Tops $3 Trillion For First Time Ever

The U.S. Federal Reserve‘s balance sheet topped $3 trillion for the first time as the central bank continued with its easy-money policy.

The Fed’s asset holdings in the week ended Jan. 23 increased to $3.013 trillion from $2.965 trillion a week earlier, the central bank said in a weekly report released Thursday.  The Fed’s holdings of U.S. Treasury securities rose to $1.697 trillion Wednesday from $1.689 trillion a week earlier.  The central bank’s holdings of mortgage-backed securities rose to $983.17 billion, from $947.61 billion a week ago.

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A detailed interactive chart of the Fed's balance sheet, courtesy of the Cleveland Fed.

• View Interactive Chart in Full Size

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Here's more on Bernanke's insanity from Zero Hedge.

Wake us up when the Fed's balance sheet is $4 trillion, in precisely 11 months.  The Fed will monetize roughly half of the US budget deficit in 2013.  This is what the Fed's balance sheet will look like in 1 year:

Another way of visualizing this is how many assets as a percentage of US GDP the Fed will hold on its books.  Currently, this number is 18%.  By the end of 2013, the Fed's historical flow operations will be accountable for 24% of US GDP.

Why is this important?  Simple: when the time comes for the Fed to unwind its balance sheet, if ever, the reverse Flow process will be responsible for deducting at least 24% of US GDP at the time when said tightening happens.
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And finally from Global Macro Monitor.
How Much QE Is Leaking Into The Economy?
We have posted several pieces (see here and here) on how the expansion of the Fed’s balance sheet is financed by reserve creation, which are held by depository institutions in the form of excess reserves and not circulating in the economy.   In the chart below we try and get a sense of how much of the quantitative easing has leaked out of the banking system into the economy.
The monthly data in the chart below is the year on year change ($ billions) of total Federal Reserve assets less excess reserves of depository institutions.   Because the last observation of excess reserve data is from December the chart doesn’t capture the latest effects of quantitative easing.

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Bernake's bubble theme song (Nancy Sinatra):



Would you like to ride in my beautiful balloon.