Exploring the Potential Impact of Unrestricted Federal Reserve Economic Powers
The Federal Reserve’s Unprecedented Actions During the COVID-19 Pandemic
The Federal Reserve took unprecedented measures as it propped up an economy halted by the COVID-19 pandemic in 2020. Jeanna Smialek’s book “Limitless: The Federal Reserve Takes on a New Age of Crisis” dives into how the Fed got to this point and what comes next now that those powers have been exercised. This article will explore the moment in March 2020 when the Fed intervened in the economy and its impact on the markets.
The Impact of the Federal Reserve’s Actions
By the end of March 2020, memes and YouTube videos had begun to surface about the Federal Reserve’s actions. Jerome Powell had become a cultural touchpoint, and “money printer goes brrrr” had become ubiquitous in Twitter’s finance-focused corners. Google search interest for “money printer” spiked and was most intense in Singapore, Canada, and Scandinavia. This showed how much the world was paying attention to American policy.
It wasn’t the first time a central banker had become a cultural touchpoint. During the 2008 crisis, Ben Bernanke earned the label “Helicopter Ben” after he gave a speech mentioning a particularly novel type of monetary policy that involved a “helicopter drop” of money into the economy. Cartoon artists nationwide had seized on the line, doodling the bearded and balding Bernanke chucking bags of cash out chopper doors.
The Federal Reserve’s Reputation
By March turned into April, the Fed’s actions had become a major, even the primary, driver of markets. This reputation was cemented on March 23, 2020, when news broke that German Chancellor Angela Merkel had suggested the European Union suspend its rules on government debt and deficits. This sent markets into a tailspin, and the Federal Reserve stepped in.
The Fed announced it would buy an unlimited amount of Treasury bonds and mortgage-backed securities and set up a series of lending facilities. This was a major shift from the Fed’s previous actions, which had been more limited. This move was seen as a sign that the Fed was prepared to do whatever it took to prop up the economy.
- The Federal Reserve’s balance sheet had grown from $4.2 trillion to $7 trillion in 2020.
- The Fed had created lending facilities for municipal bonds and midsized businesses, which the central bank had never done before.
- The Fed announced it would buy unlimited Treasury bonds and mortgage-backed securities.
The Federal Reserve took unprecedented measures in 2020, propping up an economy halted by the COVID-19 pandemic. This included creating lending facilities for municipal bonds and midsized businesses, which the central bank had never done before. The Fed also announced it would buy unlimited Treasury bonds and mortgage-backed securities. This move was seen as a sign that the Fed was prepared to do whatever it took to prop up the economy.
The Federal Reserve’s actions in 2020 were unprecedented and had a major impact on the markets. The surfaced memes and YouTube videos showed how much the world was paying attention to American policy. In addition, the Fed’s actions were a sign that the central bank was prepared to do whatever it took to prop up the economy. This is an important lesson for the future and an example of how the Federal Reserve can take action in times of crisis.