The Fed Won't Save Us From The Growing Jobs Recession

financial markets

This year has been a slow-motion train wreck on many levels. Americans have understandably been so preoccupied with the election and the unprecedented violations of individual liberties in the name of fighting COVID-19, that there hasn’t been much attention left for what the Federal Reserve and US Treasury have been up to. Furthermore, the battles being waged over the “public health” policy have obscured just how awful the US economy still is. The present article provides charts from the Federal Reserve itself (St. Louis branch) to document our alarming situation.

The US Federal Debt

We all vaguely know that tax revenues must be way down and federal spending has skyrocketed, but most Americans probably have no idea how much new debt has been added in just the last year:

federal debt

Specifically, at the end of the third quarter of 2020, the federal debt “held by the public” (meaning that this figure excludes intragovernmental holdings such as the so-called Social Security trust fund) stood at $21 trillion and change. That same figure for 3q 2019 was $16.8 trillion, meaning that the Treasury’s outstanding debt increased by some $4.2 trillion in just twelve months’ time. To reiterate, this is how much more Uncle Sam spent above revenues in just one year.

The Fed’s Incredible Buying Spree

Not coincidentally, just as the US Treasury was issuing boatloads of new debt, the Federal Reserve for its part was creating new dollars with which to soak up inordinate amounts of Treasury (and mortgage-backed) debt. Here’s the chart showing total financial assets held by the Federal Reserve System:

fed assets

In the chart above, as of mid-December 2020, the Fed held some $7.3 trillion in assets. Just a year earlier it had only held $4.1 trillion—a one-year growth of $3.2 trillion. Notice that the ballooning Fed balance sheet this year far surpassed what happened even in the wake of the financial crisis in 2008.

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