What will happen as the US Federal Reserve decides to pull away the domestic stimulus punch bowl? How capable are they to do so, considering true economic weaknesses in the system? Will their actions truly be for the good of the US and wider global economies, or is it all part of a much wider, longer term design for collective economic and political synthesis?
Since the 2008 Global Financial Crisis, which commenced in mid-2007 and started receiving major government stimulus and bailouts in late 2008, the Fed has expanded its balance sheet from $897 billion to $4.5 trillion, in unprecedented government economic interventions meant to avoid the onset of another Great Depression. The Fed’s adding of essentially money which they conjured out of thin air, amounted to over $3.5 trillion for buying up toxic securities, and constituted “about 25% of the size of the entire US economy at the time”, per author Simon Black, up from only 7% prior to the 2008 Crisis.
The Fed thus owns, per economist and trader Stephen Guilfoyle, “a portfolio bearing an ownership stake of 17% of the entire Treasury market, and 29% of the entire market for mortgage bonds issued by government-related entities that we expect the Fed to try to, if not tackle... at least manage. This is the monster under your bed.” The imminent QT is then, in essence, “the reverse of QE, with reverse effects.”
What that stimulus did was have the Fed buy up long-term US Treasuries and mortgage-backed securities, along with artificially prop up financial asset prices, with wildly asset-bubble-ridden US stock, bond and real estate markets now sitting at all-time highs due to speculation. Meanwhile, the actual US economy suffers from much higher unemployment and lack of consumer and corporate savings than what the government is deciding is fair to report. Plus, the US employment participation rate, which is an often ignored yet key indicator, is still stuck at 60%, below its pre-2008 Crisis peak of 63%, suggesting that the US is up to 8 million jobs short at the very least. The real unemployment rate is at a multiple of what the Bureau of Labor Statistics claims as well. [READ MORE]
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