by Paul Mueller
The American Institute for Economic Research
Fed-watching has become a hobby for many, and an occupation for some. When will the Fed cut interest rates? (September) How much will it cut interest rates? (25 – 50 basis points) How will this affect credit card and mortgage rates? (They will start coming down)
These are the kinds of questions most people ask. But what people wrongly ignore is the Fed’s huge balance sheet and its related consequences: subsidizing explosive government deficit spending and creating a bailout culture.
During the Global Financial Crisis of 2008, the Federal Reserve engaged in unprecedented interventions into the financial system. They opened Pandora’s Box and out of it came large scale asset purchase (LSAP) programs – better known as quantitative easing (QE). QE caused the Fed’s balance sheet to expand dramatically.