Forward Guidance Deficits Are Forcing the Fed Back Into Expansion | Lyn Alden
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Oct 29, 2025 
Lyn Alden, a macro investor and author known for her insights on fiscal and monetary dynamics, discusses crucial economic factors. She explains how tariffs can slow economic growth without halting it and reveals the redistribution of interest payments favoring wealthy savers. Lyn highlights the Fed's likely return to balance sheet expansion, the K-shaped economic recovery, and the tightening labor supply due to immigration declines. With fiscal-driven inflation concerns, she shares her thoughts on the necessity of Fed rate cuts amidst these challenges.
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Fed Balance Sheet Will Re-expand Gradually
- The Fed is likely to end quantitative tightening soon and resume mild balance sheet increases.
- Small persistent balance sheet growth is pro-liquidity but far from COVID-era QE magnitude.
Tariffs Slow Growth Without Stopping It
- Tariffs act like a speed‑brake: they slow growth and raise prices but won't stop fiscal stimulus.
- A few hundred billion in tariffs is meaningful but not a structural game‑changer for a large economy.
Interest Income Is Poorly Targeted Stimulus
- Interest payments flow mostly to wealthier savers and are less stimulative than direct fiscal transfers.
- Seniors are a notable exception since higher interest income meaningfully supports their spending and transfers to younger generations.
