No colapso 2008-2015, FED quintuplicou a base monetária.
The 2008 crisis required a much more aggressive change the in the Federal Funds Rate. It had to be brought down to zero and held there indefinably (Until this December when they raise it…no really) . This chart shows the difference in the monetary base, reference the Fed’s choice to introduce Quantitative Easing (QE) in response to the 2008 crisis. The Red area indicating the money printing after the 2008 crisis was truly unprecedented in U.S. monetary history. It marks the end the world reserve currency credit induced expansion we have had for quite some time. Both policy changes of the rates and especially the blow up of the monetary base represent complete phase transitions of the tools implemented by the Fed. The increase in the monetary base with QE would have been quite unthinkable just a few years earlier. The debate of what the appropriate response to the two crises were very different; representative the diminishing return of Fed Policy tools.
Unfortunately for the Fed, the gig is up. While they struggle to find an appropriate time to introduce a 25 basis point increase in the short term rate, there awaits the next exponential transition into what will be required to stabilize the next crisis. A crisis that will be worse than 2008 because we are that much more in debt, and the Fed has already used up its easy fixes from the last crisis.Em meros 7 anos imprimiu quatro vezes a quantidade de moeda que levou 100 anos para ser criada.
What will the next transition look like? If the previous regime of a rate reduction of 500 basis points was insufficient, even NIRP (Negative interest rates) will not work; as we would be talking about an additional few more basis points. Negative interest rates would also punish savers and those living off fixed income even further.This would be an awkward and likely unpopular policy to implement. It also would have a dubious effect on the economy, as we would descend into an even deeper liquidity trap. The next policy regime will require even more quantitative easing, and perhaps alternative methods of the channel used for injection. I would expect a broader spectrum of securities purchases by the Fed to perhaps include coordination of a massive expansion in government fiscal stimulus. The last crisis resulted in the monetary base going from 800 billion to 4 trillion dollars.
Potencial explosão destruidora.
The next round of QE will require a multiple of that. This next chart is not a prediction, but is illustrative of of the exponential nature of the next phase transition of Fed monetary policy. Just as what was ultimately done after the 2008 crisis would have been considered unheard of prior to the crisis, so too will the next policy implementation be drastically beyond the scope of what is currently being considered. Such is the nature of the exponential and discontinuous events that face us in a world manipulated by the Federal Reserve.