Zero Hedge: Much 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
