Federal Reserve’s balance sheet is officially over 3 trillion dollars as it continues to buy assets to “ease” monetary policy and feed the stock market. But what are the consequences to such gluttonous, damaging pursuit as blind mortgage asset buying as the FED’s QEternity? Let’s find out.
The Federal Reserve has been doing this since all the way back in November 2008, when FED bought over 600$ billion of mortgage-backed-securities. By the end of March 2009, it held 1.75 trillion of them.
By 2010 it has stopped its purchasing bonanza since the economy was “getting better”. That didn’t last for a long time, so a Quantitative Easing 2 and 3 were rolled out later.
What exactly does Quantitative Easing do? It accomplishes only superficial results. You see, when the central bank or in our case, the FED announces its going to buy tons and tons of assets, no matter the price, massive market, bank and investment speculation begins. First, because FED is buying, it increases the “money supply”, which isn’t really the case as all the money are just pixels on computers screens, but it gives banks more money and therefore makes credit more affordable at cheaper rates.
Yet this has proved to be a failed idea, since most banks keep their money and do not lend them or actively buy and invest and fuel the economy. Since tensions and general pessimism are still high, banks do not want the risk of bust mortgages and unpaying debtors. They just keep the money to themselves.
The second thing this achieves is a purely visual spectacle, as the markets all over the country go “up” for a month or two, therefore, some confidence and optimism should ensue. This is completely void of all reality, as every Quantitative Easing since 2009 was met by smaller and smaller market increase and with mounting skepticism.
So there are no good, long lasting effects of FED’s ridiculous and generous asset buying program, yet its balance sheet is up with trillions of it? What’s happening?
First of all, everyone should know that all these Harvard economists, central bankers, fed chairmen and so on, all of em’ have no idea how to fix this mess. They try all these different, antiquated methods, yet in the age of debt, fiat money and the fall of hard currency, these monetary policies have no real impact on the economy.
The Status Quo
They maintain the status quo, they please the bankers, the “holders’ of the status quo and they keep the system running, blind to its shortcomings and failures. People still borrow; bankers still make risky bets and central banks shower money on countries.
We exist because we believe in money and bankers all over the world exploit this petty lie to their massive advantage. Wouldn’t you?