Federal Reserve Creating Long-Term Issue

Most locally don't realize how things the Federal Reserve does affects us locally. Many who do see the Federal Reserve as evil. I don't agree with that. We do need a national bank, however, that bank must be responsible and the Federal Reserve Bank is no longer that. Any time the Federal Reserve buys something must print the money to buy it. It doesn’t have cash. For instance, if the chairman of the Fed buys my Toyota for $10,000, all of a sudden tomorrow there would be an extra $10,000 in my checking account. The money is electronically printed. Then when you look at the Fed’s balance sheet, you’d see my $10,000 Toyota added as an asset on the Fed’s book.

 Each week the Fed publishes its balance sheet or its list of assets, so you know how much money it has printed. Like I said, each time it buys an asset it prints the money to buy the asset. From the time the Fed started in 1914 to 2008, its assets were grew from $0 to $800 billion. That is how much money it printed in its first 94 years -- $800 billion or about $8 billion a year.

 Right now and for the last few years, the Fed has been buying $75 billion in US Treasury bonds and mortgages. To buy those loans (assets) it prints that much money monthly. Doing the math, they are printing $900 billion a year ($75 x 12 months). In sum, they are printing each year, what it took them 94 years to print before that point.

 That is an off the charts creating of money. Right now the Fed’s assets are about $4.4 trillion. Or about 5 times what it was in 2008. All that money goes into the financial system, and some/ most of it gets spent. That extra spending generates more production or GDP, but a lot of it just raises prices and causes inflation. You can see rising prices in stocks, houses and food.

 Here is a good way to track the true inflation rate. http://www.shadowstats.com/alternate_data/inflation-charts

 The Fed is acting very irresponsibly in the long run. Once that inflation genie is out of its bottle, it is hard to get him back in.