Economy-Economic Policy

So, Why Has The U.S. Economy Not Sunk Yet? It Is Because The Fed Is Doing A Whole Lot Of Bailing.

DailyKos 11/26/19

Now, take a look at the picture below and you will notice that during the Obama administration, as the economy started to recover, the Fed eventually stopped buying more assets and acquiring more debt and left things relatively constant.

Please keep in mind that the debt the Fed acquired when purchasing these assets during the Obama administration exactly matched the value of assets that it acquired.  During the Obama recovery, the Fed acquired roughly $4 trillion in both assets and debt. It really does not need any more of either.

If the Fed starts buying billions of dollars in securities, such as bonds, in order to inject money into U.S. markets, that is Quantitative Easing—no matter how many times the Fed says it is not. Currently, the Fed is buying bonds at the rate of about $60 billion a month.  That’s about 720 billion dollars a year, or almost three-quarters of a trillion dollars.  If that sounds like a lot of money, it is.  

US Federal Reserve starts “quantitative easing forever”

WSWS 10/19/19

On Wednesday, the Federal Reserve began an operation, lasting at least six months, to purchase around $60 billion of Treasury bills a month in response to sharp spikes in interest rates in overnight markets. The following day, in a separate action, the New York Federal Reserve injected $104.15 billion into financial markets to boost liquidity.

Together with the Fed’s decisions to twice cut interest rates, with the prospect of another cut at the end of this month, these moves make clear that, in conditions characterised by the International Monetary Fund as a “synchronised” global slowdown, any efforts to “normalize” monetary policy are well and truly over.