The Fed likes to claim that its policies are aimed at helping Main Street. Ben Bernanke began this argument when he was still Fed Chairman. Janet Yellen has since taken it a step further claiming that she comes from an “intellectual tradition” that it is important to use “public policy” to “make the world a better place.”
Anyone who’s spent even two minutes reflecting on the state of affairs in the last five years knows this is bunk. However, for the sake of the argument, let’s take the Fed at its word: that it does indeed care about Main Street.
If this is indeed true, then the Fed’s efforts have been an abysmal failure. The Fed’s balance sheet has expanded over $2.4 trillion since the Great Recession allegedly ended.
For the sake of argument, let’s assume that ALL of the money involved in the Fed’s balance sheet expansion during this period went towards creating jobs in the US economy.
Indeed, let’s take it a step further and say that the Fed is directly responsible for every single job created since June 2009 when it continued printing money by the billions to help the “recovery.”
We realize that we’re ignoring population growth, folks who dropped out of the jobs market, and a slew of other factors in this analysis. But the point of this exercise is to grant any and all issues in favor of the Fed.
The reason we’re doing this is because the results are terrible enough even under circumstances in which every issue is decided in the Fed’s favor. One can only imagine who awful the results would look if one were to include these other issues which would raise the amount of money spent per job created.
Having said that, consider the following…
· The US recession allegedly ended in June 2009. At that time, 140,196,000 people were employed in the US and the Fed’s balance sheet was roughly $2 trillion.
· As of July 2014, 146,352,000 Americans were employed and the Fed’s balance sheet was $4.4 trillion.
So, based on our assumptions (that ALL of the Fed’s money went towards the real economy and that the Fed is responsible for every job created since June 2009 when the recession ended), this means the Fed spent $2.4 trillion to create 6,156,000 jobs.
That’s $389,863 spent PER JOB CREATED.
Now, the odds that the 6.1 million jobs created since June 2009 pay anywhere NEAR this amount in salary is next to zero. And bear in mind, our analysis is based on key assumptions ALL of which are in favor of the Fed.
The reality is that the Fed has spent vast amounts of money and has very little to show for it. Even if you give the Fed the benefit of the doubt that all of its money has gone into the real economy to create jobs, this a colossal waste of money.
The Fed’s efforts, if they were meant to help Main Street, have been a colossal failure. If they were not intended to help Main Street, then the Fed is lying.
Neither of those are positive qualities.
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Best Regards
Phoenix Capital Research