What Can The Fed Do? Print Money & Buy, Buy, Buy… Stocks

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Zero HedgeMuch has been written about what the Federal Reserve cannot do: it can’t stop the Covid-19 pandemic or reverse the economic damage unleashed by the pandemic.

But let’s not overlook what the Fed can do: create U.S. dollars out of thin air and use these dollars to buy assets either directly or through proxies.

Let’s also not overlook how much the Fed can print/buy. The Fed’s balance sheet currently stands at $4.24 trillion. Doubling this to $8.5 trillion would bring the balance sheet to 39% of U.S. GDP ($22 trillion) and 7.5% of total U.S. household assets ($113 trillion). In the context of GDP and household assets, doubling the balance sheet would be extraordinary but not destabilizing.

Note how the the Fed’s balance sheet remained flatlined for 10 weeks and only popped higher this past week:

  • 12/25/19 $4.165 trillion
  • 1/1/20 $4.173 trillion
  • 1/8/20 $4.149 trillion
  • 1/15/20 $4.175 trillion
  • 1/22/20 $4.145 trillion
  • 1/29/20 $4.151 trillion
  • 2/5/20 $4.166 trillion
  • 2/12/20 $4.182 trillion
  • 2/19/20 $4.171 trillion
  • 2/26/20 $4.158 trillion
  • 3/4/20 $4.241 trillion

Opinion: Ok, most arm-chair economists and amateur virus experts have the opinion that THIS TIME IS DIFFERENT.

I heard that in the 1987 crash, the 2000 dot com crash, the 9/11 crash and most recently the 2008 financial crisis. Each time investors take a beating, sell their stocks and buy treasury bonds. Institutional traders were only too happy to buy at bargain prices.

Nothing is scarier than when Wall Street has a sale on stocks. What I learned over the years is that by the time stocks crash most investors have sold off their bonds and alternative investments leaving themselves exposed to risk with nothing to offset. It is important to have some investments that zig while others zag.

This is almost a bear market in stocks, but NOT in bonds or gold. So while everyone says the Federal Reserve cannot fight a virus, they seem to forget that in 2008 they saved the entire global banking system from shutting down. The problem is the price it took to do so.

Each time the Fed and the rest of the central banks bail out the market, they print money and flood the banking system with counterfeit (fiat dollars). Each time they say it is temporary. Each time they say they will pay back the debt they created, and each time it gets swept under the rug and passed on to future generations.

It is insane. And it will one day implode and most people will have no idea why it happened. They will probably blame the Jews, again.