Once upon a time, the Federal Reserve's massive balance sheet was a reassuring pillar in the market's mind. As soon as there was any turbulence, everyone waited for the Fed to step in and rescue the market. But recently, this logic might need to be rewritten.

In May of this year, Kevin Woor, a former Federal Reserve Board member and a widely favored candidate for Fed Chair, delivered some hard truths in a speech. He bluntly stated that the Fed is currently "almost daily involved in every corner of the banking market," with its balance sheet far exceeding actual needs, reaching a trillion-dollar scale of redundancy. This sounds a bit harsh—equivalent to saying that this "guardian" should have slimmed down long ago.

Woor further pointed out that the reason for the out-of-control surge in U.S. fiscal spending over the past five years is partly due to the Fed's actions. It not only intervened during crises but also bought government bonds aggressively during "relatively stable" economic days, effectively "masking" the true cost of government spending. This is akin to using monetary policy as an anesthetic for fiscal deficits.

You can imagine how stark this contrasts with the market's accustomed "Fed put options." Previously, the market relied on the Fed's implicit guarantee for trading; now, someone is about to change the rules.

Even more interestingly, if Woor actually takes the helm as Fed Chair, coupled with the potential of AI to change the underlying relationship between productivity and money supply, a fundamental shift in monetary policy might truly be on the horizon. Since the 2008 financial crisis, the Fed has long ceased to be just an independent institution managing monetary policy; it has evolved into an "all-powerful nanny" that injects liquidity into market risks and fiscal black holes. Quantitative easing has transformed from a crisis tool into routine operation. Whether this seventeen-year "easing party" can continue may very well be at a crossroads.