Is the Federal Reserve sustainable?
GDP and Monetary Base
The Monetary Base and the GDP have historically been 98% correlated reflecting the reciprocal relationship of money and economic expansion.
According to the Federal Reserve, in the 12 years preceding the financial crisis the GDP expanded 46%, while Monetary Base increased 47%.
In the 12 years following the crisis, the GDP expanded 31% while the Monetary Base increased more than 600%.
Where did the money go?
In 2008 the Federal Reserve began purchasing $1T a year in US Treasuries and bank debt.
The Federal Reserve currently holds $7.4T in total assets on their balance sheet.
The money created by the Federal Reserve is apportioned to 7 primary dealer banks domiciled in the US and 17 overseas.
The Federal Reserve in on pace to expand the monetary base to $32T by 2032.
*Bloomberg sued The Federal Reserve in 2011 and uncovered a $7.7T secret bank bailout not represented here.
- 1996-2008 : 1.77%
- 2009-2020 : 2.69%
Despite the 600% increase in the Monetary Base, Inflation has increased less than 1% on average since 2008. This indicates most of the money did not enter into circulation and has stayed within the primary dealer banks.