Part 6/13:
He also raises concerns about banks sitting on over $500 billion in unrealized losses on securities, a situation that could force recognition of losses if rates stay high and defaults rise. Although such losses do not threaten systemic stability immediately, they influence banks’ behavior, prompting more cautious lending.
The Role of the Federal Reserve and Policy Missteps
Hanky criticizes the Federal Reserve's approach, which he claims focuses excessively on current interest rates rather than the underlying money supply. Currently engaged in quantitative tightening—a process where the Fed reduces its balance sheet—the Fed’s actions are constraining the growth of the money supply, which he argues is the real driver of inflation and growth.