from Zero Hedge
Two days ago, the WSJ’s Fed watchers Jon Hilsenrath and Nick Timiraos started off their expose on how the “Fed Is Changing What It Means to Be a Central Bank” in which the only thing that really mattered was the first paragraph:
The Federal Reserve is redefining central banking. By lending widely to businesses, states and cities in its effort to insulate the U.S. economy from the coronavirus pandemic, it is breaking century-old taboos about who gets money from the central bank in a crisis, on what terms, and what risks it will take about getting that money back.
This is a good description of what the Fed has done in the past month: the breach of virtually every central bank taboo imaginable, crossing lines not even Ben Bernanke dared to cross by openly buying corporate bonds and backstopping virtually all credit instruments, all in the pursuit of stabilizing markets the US economy and avoiding a full-blown depression, even if it meant institutionalizing moral hazard as the only imperative and ending free and capital markets as we know them, resulting in “markets by decree.” It also propelled the Fed’s balance sheet to a record $6.6 trillion, well on its way to hitting $12 trillion, or half of US GDP.