Federal Reserve Governor Barr: The goal of reducing the balance sheet is wrong or to allow the Fed to have more involvement in the market According to Golden Finance, on May 15th, Federal Reserve Governor Barr stated that relaxing liquidity regulations to reduce the size of the central bank's balance sheet is a bad idea that could harm the safety of the financial system. Recently, there has been a lot of discussion about reducing the size of the Federal Reserve's balance sheet to minimize our 'footprint' in the financial system, "Barr said in a speech at a conference hosted by the New York University Money Market Association. I believe that reducing the balance sheet is the wrong goal, and many proposed solutions to achieve this goal will weaken the resilience of banks, hinder the normal operation of the money market, and ultimately threaten financial stability, "Barr said." Some solutions will actually increase the Fed's' footprint 'in the financial market.' Barr pointed out that allowing banks to reduce their liquidity holdings as a means of reducing Fed assets may increase the risk of these institutions turning to the Fed's liquidity tools when they encounter difficulties. He stated that the size of the Federal Reserve's balance sheet is not the correct standard for measuring its influence in financial markets. In the system where the Federal Reserve creates reserves "at no cost," the real focus should be on the effectiveness of the Federal Reserve's monetary policy implementation. (Dongxin Society)