Month after month since the introduction of QE 3 in late 2012, honest-looking Fed chairman Ben Bernanke told eager reporters and TV economists and other talking heads during the press conference after each FOMC meeting that the money-printing and bond-buying binge in the coming month would expand the Fed’s balance sheet by $85 billion. A fact cited worldwide.
But it was a big lie.
If it had been true, those benighted citizens with their ill-placed distrust in the Fed who’d take a calculator to its words, would expect this monthly addition of $85 billion over the 12 months of 2013 to amount to $1.02 trillion.
That’s already a dizzying amount, beyond comprehension for most mortals, though by now we routinely throw around trillions. It would exceed by 15.5% the $883.3 billion that the US government had to borrow over the same period to make ends meet. Hence, as per the proffered FOMC announcements, with its heroic policies, the Fed would not only monetize the entire deficit for the calendar year 2013, but also part of the debt incurred in prior years. Banana republics are famous for this kind of sophisticated monetary policy.
So the Fed’s balance sheet should have expanded by $1.02 trillion in 2013. Maybe not to the penny, or maybe not even to the billion – heck, let’s give these people some wiggle room. But gosh….
The Fed’s balance sheet for the week ended January 2, 2013, showed $2.9603 trillion in assets. A year later, the balance sheet for the week ended January 1, 2014, showed $4.0661 trillion in assets. So the Fed had added $1.106 trillion to its balance sheet during that year – $85.8 billion more than it had announced. It had in fact added on average $92.2 billion a month, not the bull-malarkey $85 billion that it kept telling the Wall-Street media circus. That’s $7.2 billion a month more than announced.
And thus, the Fed’s monetization of the Federal debt exceeded the $883-billion deficit of calendar year 2013 not by 15.5% but by 25.2%!
It’s bad enough that the Fed has engaged in this policy that is inflating the largest credit bubble in history along with other bubbles left and right, distorting markets all around, polluting price discovery, pushing retail investors and desperate retirees out to the thin end of the risk branch, and enriching the very few that benefited from it while leaving the unemployment fiasco, as measured not by the statistically adjusted unemployment rate but by the more honest employment-population ratio, mired at the same miserable levels reached after the Great Recession.
That the Fed heads have been lying all along in their speeches and meeting minutes about the amount of money the Fed actually printed is going to jack up exponentially my already sky-high confidence in any of its pronouncements – and in the institution itself.
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.