For several decades, through many crises, the Federal Reserve was a pillar of stability, maintaining a balance sheet level at roughly 6% of GDP. It radically shifted policy beginning with the 2008 financial crisis and continuing through Covid, expanded to 36% of GDP. Now, the Fed is sharply reversing course again. The data and dashboard presented below illustrate the consequences of these policy shifts.
Historically, an increase in money supply fueled a proportionally greater increase in GDP. That would then lead to an ever greater increase in household income. That was called the “Multiplier”.
However, since the beginning of Quantitative Easing in 2009, tools used to stimulate the economy appear to be working in REVERSE. Over that timeframe, consider:
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