Friday, February 7, 2014

The Fed's 10-1 Leverage Has Paid Off! (Musical Tribute)

The following chart compares the trillions of dollars the monetary base has grown (in blue) to the trillions of dollars household net worth has grown (in red) since the first quarter of 2009.

Click to enlarge.

Each dollar the Fed spends gets us back ten! Why on earth is the Fed tapering the sure thing? We need even moar leverage! Not less!

Crazy Theory

Let's cash out $10.8 trillion of household net worth (just half of the gain), hand it to the Fed, and let them reinvest it for us! We'll get $108 trillion back! We can then use that money to pay off all our debts and still have plenty left over! Perhaps even enough for every man, woman, and child to retire!

Why hasn't anyone else thought of this? Genius!

December 17-18, 2013
Minutes of the Federal Open Market Committee

Participants were most concerned about the marginal cost of additional asset purchases arising from risks to financial stability, pointing out that a highly accommodative stance of monetary policy could provide an incentive for excessive risk-taking in the financial sector.

Oops. Please disregard my crazy theory above. It would seem that I was offering the very thing the Fed is most worried about. You have to admit that it seemed like a darned good theory on paper though. I just hadn't factored in any unintended consequences. In my defense, it's really easy to do once I went down the "excessive risk-taking" path (gambling $10.8 trillion on a "sure thing" would definitely qualify).

Marrakesh Night Market

The magic lies scattered
On rugs on the ground
Faith is conjured by the night market's sound

See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart

No comments: