Obviously there has been a lot of talk about the Federal Funds Rate decisions and Quantitative Tightening/Easing, but it’s been troubling why more people aren’t talking about the Fed balance sheet.
Back in 2008 when Bernake/Paulsen agreed on terms and congress passed the Emergency Economic Stabilization Act it was agreed that the Fed would buy $700b in mortgage back securities from the banks which led to the Act being nicknamed the “bank bailout of 2008.”
Also at the time it was said (by everyone) that eventually those emergency policies would need to be rolled back. FOMC member Charles Evans said “once the economy recovers and financial conditions stabilize, the Fed will reduce the size of the balance sheet.”
Since then, not only was the balance sheet not reduced, the bailout has ballooned from $700 billion to $9 trillion (43% of GDP). And in 2016 Bernake himself wrote a paper completely changing the original opinion and saying that they would just grow the balance sheet infinitely:
https://www.brookings.edu/blog/ben-bernanke/2016/09/02/should-the-fed-keep-its-balance-sheet-large/
Obviously people can see the issue here, what was once considered a $700 billion bank bailout has quietly become a $9,000,000,000,000 bailout and the S&P 500 has been directly 1:1 correlated with the growth of this “balance sheet” amount:
https://www.currentmarketvaluation.com/posts/2021/07/Fed-Balance-Sheet-vs-SP500.php
Also at the height of Covid in March 2020 the Fed decided to abandon factional reserve banking completely, setting the reserve requirements to 0:
https://www.federalreserve.gov/monetarypolicy/reservereq.htm
So now that we are seeing persistent and extreme inflation isn’t this absolutely a case of taxation without representation? The banks have given themselves $9,000,000,000,000 which required no congressional action and now people are paying for it in the form of higher prices on goods, services, housing, transportation, and energy etc.
Why aren’t more people talking about this, when TARP passed in 2008 it was headline news.
