So You Created $3 Trillion Dollars Out of Thin Air

So You Created $3 Trillion Dollars Out of Thin Air

A person gets up every morning at 6am, showers, eats breakfast, and drives to work. They are in the office for 8 or more working hours with a half hour for lunch. They move things, sell widgets, maybe cook burgers, serve customers, drive trucks, or do any of a thousand honest jobs that require hard physical work or innovative, creative thinking. They leave work, drive home, have dinner with their family, watch TV, and go to bed.

Then one day, Americans were told to stay home. Many people could work at home, but most of those 31 million people could not. Their jobs were on hold or maybe their job just disappeared— maybe for a few months, maybe forever.

Meet the Washington Elite

There is a very different group of seven elite men and women. They too get up early, they are driven to work by their chauffeur in a luxury vehicle. These people are extremely well educated, well paid. They are Washington insiders.

One of these people is known as the chairman, he’s the boss. He’s one of the most important leaders in America. Here are his credentials.

The Feds Face Another Crash

Recently, these seven bankers were faced with the financial fallout from the Covid pandemic… businesses were closed across America, the economy was in a free-fall, the Stock Markets were crashing— as you can see.

Stock Market Crash

Trillions of Dollars had disappeared in IRAs, 401Ks, retirement, savings, and investment accounts. Years of profits disappeared in days. For the second time in 12 years, fears of an economic bust triggered panic-selling by early March 2020. All U.S. financial markets were threatened.

Suddenly, The Bond Market Freezes Up

Investors also became worried a pandemic-fueled recession would leave companies unable to repay borrowings. The $10 trillion corporate bond market was unexpectedly teetering on the brink.

A meltdown in the Stock Market can easily spread to other markets worldwide, leading to a broad market crash. As Government Bonds became illiquid, the Fed acted. Nothing less than the bedrock of the global financial system was at risk during this pandemic meltdown.

Meet the Superheroes— The Federal Reserve Governors

For the third time in less than 20 years, the Federal Reserve was forced to step in to prevent a total meltdown of the Stock Markets, the Bond Markets, and to save the banking system. Seven people created a quick $3 Trillion Dollars or so. There was no time to print $3 Trillion Dollars and no need— a series of computer keystrokes in Washington produced another miracle fix.

TOTAL FEDERAL RESERVE ASSETS
Over $7 Trillion Dollars 9/23/20

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The Federal Reserve Goes On A Buying Spree

To stabilize the system the Fed acted. Since March, the Fed has expanded its corporate debt purchases to include Stocks, ETFs and even certain “junk” bonds. And the Fed’s backstopping even calmed some markets it wasn’t specifically supporting.

We understand, nothing less than the global financial system was at risk and we are all thankful for the “Financial Firemen” who were called in to put out the meltdown. However…

Can 7 People Replace the Work of 31 Million Americans?

We want to ask a few simple questions bothering us since the March Crash.

Can the seven members of the Federal Reserve create $3 Trillion Dollars, purely out of thin air, and replace the gross domestic product of 31 million Americans and thousands of businesses?

If these guys can simply “print” up a few Trillion Dollars—with no financial consequences— then why have those 31 million people been going to work every day? Why did the tens of thousands of small businessmen risk their life savings starting up and running businesses?

Perhaps the next question should be— “Even after the creation of $3 Trillion Dollars, what happens next to those 31 million people and thousands of businesses?”

Is there no end to the $27 Trillion Dollars of U.S. National Debt? Is the nation running on borrowed money and borrowed time? How much fake money can the Federal Reserve hand out before there are serious financial consequences to us all?

 

We don’t pretend to be an economist or as smart as anyone in the Federal Reserve. So, we recommend this Financial Times July 2020 article for a detailed look at this subject. It discuss interest rate drops and other issues we avoided.

https://www.ft.com/content/ea6f3104-eeec-466a-a082-76ae78d430fd

There’s also the Federal Reserve website for an explanation of the current crisis.

https://www.federalreserve.gov/econres/notes/feds-notes/implementing-monetary-policy-in-an-ample-reserves-regime-when-in-crisis-note-3-of-3-20201002.htm