The Fed’s balance sheet pushes through $4.4 trillion, and we get a “moderately OK” economy.
Bullion.Directory precious metals analysis 9 October, 2014
By Christopher Lemieux
Senior FX and Commodities Analyst at FX Analytics
Quantitative easing was presented as a last case scenario to stop the economic hemorrhaging, which was caused from financial institutions’ reckless risk management and unsavory practices. The Fed cut the key benchmark rate to zero-to.25 percent and bought treasuries and asset-backed securities, pushing their balance sheet from nearly $800 billion in 2008 to well above $4 trillion today.
We would expect that a few trillion in stimulus and near-zero interest rates would buy a lot more than two percent growth within the world’s largest economy.
Former Fed Chairmen Alan Greenspan, who was largely labeled the creator of the 2007/8 housing bubble, was on CNBC last Friday. What he said was remarkable:
Without low rates, we wouldn’t have at least a moderately OK economy that now exists. There’s a significant plus here.
The significant plus is still yet to be determined, but his words at least bring clarity within the current situation.
The kitchen sink seemed to have been thrown at the economy, and it’s only “OK.” The Fed’s policies have only helped a little and the impending risks are still unknown.
This is an unprecedented period in monetary history. We’ve never been through this. We really cannot tell how it will work out.
The blind leading the clueless. Take a look at the Fed’s growing asset hoard compared to their own real GDP forecasts (midpoint):
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