The Fed Balance Sheet

Little House of Hoarders

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As always, this is not financial advice.

I remember a month ago I thought, ‘Geez, does everyone and their mother need to be writing about the Federal Reserve right now, enough already?’ And now I find myself writing about it a second time in just a few weeks. How do you spell hypocrite? But seriously, it is important for us to understand how it works, and what it is doing. To a certain extent, what it is.

Recently, I wrote a post called ‘Is Jerome Powell a Patriot’ and if anything, it got some people thinking a little differently. Whether or not Powell is working with Trump to take down the foreign cabal banking system that controls the world or not, there are a lot of inconsistencies to the argument that he is, in fact working with the cabal.

Writing that post inspired me to look a little deeper into the Federal Reserve and the Fed’s balance sheet, how it has expanded and retracted since the financial collapse in 2008, and when it has expanded and contracted. Spoiler alert: it’s mostly just expanded. But first, let me try to explain in simple terms how the Federal Reserve uses their tools to, in their words, promote employment, price stabilization, and a long-term, but moderate interest rate.

We’re probably a lot more familiar with how the Fed uses interest rates to stimulate the economy or lower inflation. They lower interest rates to stimulate the economy. Lowering interest rates promotes more investing in real estate, the stock market and business expansion. The cost of borrowing becomes less expensive. Lowering interest rates also makes bonds that are currently held more valuable, because any newly created bonds won’t pay the investor as high of an interest rate.

Raising interest rates is a tactic used to lower inflation. The thought is that, if they raise interest rates, people will invest less. People will choose not to buy a house, or borrow to invest in the stock market, or expand their business. In fact, these people will likely try to pay off their debt because it suddenly becomes more expensive to hold. This likely means companies will lay off employees to lower expenses. Raising interest rates kills the economy, and that in turn kills inflation, because people stop spending as much money.

The Federal Reserve’s Balance Sheet is something people may not understand as well. If you didn’t understand the interest rates aspect of things, you do now. Just reading the last paragraph makes you more educated on it than most people.

What is the Fed Balance Sheet?

The Federal Reserve balance sheet refers to the balance sheet of the US Federal reserve, also known as the central bank. The main objective of the balance sheet is as—I mentioned—to promote employment, price stabilization, and a long-term, but moderate interest rate. Moreover, economic stability and maintaining the dollar valuation are also on the agenda. 

Anything that the Fed purchases or owns is an asset. The Fed decides the holding, expanding, or shrinking of its assets. The assets mostly include Government Securities. The Fed holds United States treasury bills that have 4 to 52-week maturities, Treasury notes that mature in 2-10 years, and Treasury bonds that mature after more than 10 years. Again, this is the bulk of what the Fed holds on its balance sheet.

Agency Mortgage-Backed Securities are second in size; they are packaged securities containing a basket of home loans that the banks and financial institutions sell to investors. Mortgage-Backed Securities was one of the big things that got banks in trouble in 2008, as so much in Wall Street was tied to home loans.

Federal Reserve assets also include loans to banks through the repo and discount window—basically, the practice of lending Treasuries to banks to support the smooth functioning of credit markets and economic growth.

The Fed balance sheet also has liabilities, which consists mostly of dollars in circulation in the US, as well as Bank reserves, and reverse repos, which are borrowings of Treasuries from commercial counterparties used to hold the federal funds rate in the Fed's targeted range.

Depending on the situation, the Fed can buy or sell assets, like treasury bonds and mortgage-backed securities to infuse money into the market, or they can absorb the money from the market. In 2008, the Fed bought a lot of bonds to infuse money into the economy and reduce the bank rates.

In short, the Fed increases its balance sheet in situations of recession or some major circumstances like the Covid pandemic. But when the economy starts to recover, and the excess assets on the balance sheet are no longer required to “protect the economy”, in theory, the Fed should reduce or normalize its balance sheet.

The problem is, in the past 15 years, the Fed has done very little in the way of reducing its balance sheet. As a consumer, when you buy new stuff, you need to get rid of your old stuff. Otherwise, you become a hoarder. The Federal Reserve could be viewed as a hoarder.

Another imperfect analogy is comparing Fed Balance Sheet to a credit card: when cash flow is tight, you might charge more to your credit card, understanding that, at some point, you need to pay it down. In a best-case scenario, paying it down will be a slightly painful process, but you still need to do it, and if you try to pay it down too quickly, you might put yourself into another bad cash flow situation and have to actually add to the debt again.

Can the Fed be used for political purposes? I’m glad you asked.

Whoever is in charge of making Fed decisions can use it to temporarily fix bad situations. By lowering interest rates and adding to the balance sheet, the Fed can stimulate the economy. It’s like taking a double espresso after getting three hours of sleep. But you can’t continue to live this way long-term—you can’t live off of six Red Bulls a day and three hours of sleep forever. Eventually, you need to get a good night’s sleep. Eventually, you need to bring interest rates back to a more normal, sustainable level while reducing down the balance sheet. If you do this in a slow and methodical manner, you can hopefully stay within the pain threshold and not cause the economy to collapse.

The Fed kept interest rates extremely low and continued to add to the Fed Balance Sheet the entire eight-year duration of Obama’s presidency. At no point did Obama’s Federal Reserve ever feel they could normalize rates or reduce down the balance sheet. In eight years, they never thought the economy was healthy enough to make any serious efforts towards normalizing rates and lowering the Fed balance sheet. They call this a “sugar high” economy—the artificially-stimulated propping up of an economy.

I’m sorry, but the American economy wasn’t in “intensive care” the full eight years of Obama; they could have done more to normalize things, but they chose not to. They chose to continue to prop up the economy and make it appear their policies were good for the economy.

Ben Bernanke was appointed the head of the Fed in 2006 by George Bush. He was in position when the 2008 financial collapse occurred. Bernanke was re-appointed by Obama in 2010 and served until 2014, when Obama appointed Janet Yellen. Both Bernanke and Yellen have a reputation of believing printing more money is the answer to anything and everything that ails an economy, and that there are no consequences from printing too much money.

I believe if you take a close look at Bush and Obama, you will find they are quite similar.

I’m going to talk more about the Fed’s Balance sheet, but understand that the balance sheet and interest rates are like the two pedals on a one-speed bicycle. They work in unison to make the economy go, or to stop it.

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Let’s look at the size of the Fed’s Balance sheet from the financial collapse of 2008 to today. For simplicity, I’d like to look at its increases and decreases in percentages.

In 2008, before the financial collapse, the Fed kept a little under $1 Trillion on its balance sheet. When the collapse occurred, they quickly increased the balance sheet by 250% in just a couple of months, buying Government and mortgage-backed securities. Their reasoning was that they feared the financial market would collapse and banks would become illiquid if they didn’t take such extreme measures.

During Obama’s eight years, the Fed added an additional 219% to the Fed’s Balance Sheet, and remember, this was after already adding 250% the three months leading into Obama’s inauguration, and at no time during these eight years did the Fed ever feel they could start to reduce down the balance sheet. Again, they treated the economy like it was in “intensive care” for the full eight years.

Then came Trump.

In the first year of Trump’s presidency, the balance sheet stopped growing—in fact, it was reduced by around 1%.

Interesting, you say.

What changed? Was this political? Was the Fed no longer interested in artificially propping up the economy? For the first year under Trump, Yellen was the head of the Fed. Yes, Janet “money printing” Yellen. Yet, as soon as Trump took over, she suddenly didn’t feel the need to add to the Fed balance sheet anymore. Curious, to say the least.

After Trump was POTUS for about a year, he appointed Jerome Powell as the new head of the Fed. During the first year and a half with Trump as POTUS and Powell heading the Fed, the balance sheet shrunk by 15%. I don’t remember feeling it, and I don’t remember the economy suffering.

Let me get this straight: Trump built up the economy WHILE the Fed was shrinking the balance sheet? Doubly impressive. The only thing harder than this is what Biden did; he killed the economy while raising inflation. What Biden has done is nearly impossible, the equivalent of lowering your caloric intake and getting fatter. What Trump did pre-covid was the equivalent of eating more calories and losing fat. Biden’s time has been epically bad, and Trump’s pre-COVID Scamdemic time was epically good. Most don’t understand that Trump was pretty much running a race with a ball and chain shackled to his leg, and he was still winning, until COVID was dropped on the world.

The economy was able to grow while the Fed reduced down its balance sheet because Trump’s policies were so beneficial to the economy. Trump’s economic policies were so good that an act such as reducing down the Fed’s balance sheet couldn’t derail or slow it. Imagine if Trump’s Fed did for him what Obama’s Fed did for Obama. While it may not have been good in the long run, in the short run, Trump’s economy would have appeared even better.

In Trump’s pre-covid term, it was like our country paid off credit card debt while increasing its savings. During Biden’s presidency, it’s like the country has added to its credit card debt while using up its savings. Not only has this happened to the country, but it has also happened to many individual Americans.

In late August/early September of 2019, after a year and a half of Trump working with Powell to lower the balance sheet by 15%, a strange thing happened: all of a sudden, the Fed started adding to the balance sheet.

Why did the Fed all of a sudden start adding to the balance sheet again? Remember, this was six months before the COVID lockdowns that crippled the American economy. There didn’t seem to be anything going on that would necessitate the changing of directions with the Fed balance sheet.

What was happening in August, September and October of 2019?

Well, for one, an otherwise healthy Kary Mullis, the inventor of the PCR test, “died suddenly” of pneumonia in August of 2019. Mullis was extremely critical of Dr. Fauci, saying Fauci basically didn’t understand science and Mullis said Fauci would say or do anything to make money or gain power. Mullis also said the PCR test, which he himself invented, couldn’t be used to test for viruses. Mind you, this was at least six months before most knew who Fauci even was.

What happened a couple of months after Mullis “died suddenly”? COVID was rumored to be unleashed at the Military Games in Wuhan, China. A couple weeks later citizens of Wuhan were starting to strangely drop dead in the streets from the so-called “bat virus”.

Did Trump, and therefor Powell know something was “up” in late August/early September of 2019? Did Trump get intel that a pandemic narrative was about to be unleashed on the world? Did they slowly try to start preparing the economy for this attempt to get Trump out of power? Did they slowly and quietly add to the balance sheet in a way no one would notice?

I obviously don’t know the answer to these questions, but between late August of 2019 and the lockdowns in March of 2020, the Fed quietly added 11% to the balance sheet, after cutting it by 15% the prior year and a half. We know Trump tried to close down the country to China in January of 2020, well before anyone else was willing to act.

In March of 2020, when the lockdowns were announced, the Fed quickly added a lot more to their balance sheet. Between the start of the lockdowns and Biden’s inauguration, the Fed increased the balance sheet by another 178%. Around half of this increase occurred in the first three months of the pandemic. The rest happened during the financial recovery of the lockdowns as the country started to slowly get back to normal.

Between Biden taking office and the first interest rate increase by Powell in early 2022—roughly a year—the Fed added an additional 21% to its balance sheet. Then Powell started raising interest rates, and during the year he has raised interest rates, the Fed’s Balance Sheet shrunk 6%. While everyone was preoccupied with inflation and interest rates going up to combat them, Powell quietly lowered the balance sheet by 6%.

In March of 2023, when Silicon Valley Bank collapsed and other banks were feared to be in trouble, Powell quickly added 4% to the balance sheet. Again, this is said to keep the banks from becoming illiquid. But after a couple of weeks of gloom and doom, the balance sheet is already starting to shrink again.

What does this all mean?

In my opinion, Powell, who is worth $150 Million and doesn’t need this job, has decided he is going to get the economy back to where it needs to be. Interest rates, the balance sheet, and inflation all need to be normalized. No longer can we exist in a “sugar high” economy. He tried to start this when Trump was POTUS, but then they dropped the COVID narrative on the world and he had to do the opposite of what he wanted to do—he had to cut interest rates and increase the Fed’s Balance Sheet even more. This is akin to paying down your credit card debt and then having to add to it instead. With COVID in the rearview mirror, Powell is, in my opinion now doing what he originally set out to do—normalize the economy.

Many people have heard the claim that Trump merged the US Treasury with the Federal Reserve, and this made Trump the new head of the Federal Reserve at the time. But this would also make Biden the current head of the Fed, which is curious, because the Fed is currently doing everything it can to kill Biden’s economy and make it increasingly less likely he will be re-elected—the opposite of injecting the economy with sugar and caffeine.

Although, if you believe Trump really has some kind of control over Biden’s Administration (Devolution), then it would make sense that Trump also has some direct control of the Fed right now, which would mean Trump could be influencing the current raising of the interest rates and decreasing of the Fed’s Balance Sheet in an effort to bring down the foreign controlled cabal banking system—all on Biden’s watch, in the process waking people up and ensuring that Biden won’t be re-elected. This is total speculation, of course.

The last paragraph is some pretty “out of the box” thinking and I can’t prove any of it; all it is is me trying to make sense of inconsistencies. Some will claim I said Trump is responsible for our economy imploding. That he is responsible for why we are suffering and will continue to suffer. Instead, I am suggesting that Biden’s policies are toxic and destructive, and if Trump has some kind of control over the Fed and Treasury, he isn’t allowing the Deep State cabal to bail themselves out by using Fed tools to do so. If the Fed doesn’t allow the Biden administration to fatten the Fed balance sheet and cut interest rates, their ridiculous policies will collapse the economy. Their policies will be shown to the public to not work. This isn’t to say the Fed won’t at some point cut interest rates or add to the balance sheet, but this will likely be done AFTER the banking implosion has been detonated and in motion.

Even if one doesn’t believe Trump has some kind of control over the current Fed and Treasury, if one takes the concept of Devolution completely out of the picture, it still appears there has been some kind of merger between the Fed and the Treasury that occurred with the creating of the stimulus package at the beginning of the Covid lockdowns (the Cares Act). I’ve seen two different opinions on it: One is that the US Treasury now has direct access to the Fed money printer—they can print money anytime they want, bypassing the Fed. The other opinion is that nothing has really changed, rather like a couple that has been living together for 20 years and decides to go to city hall and officially get married. It is said the Fed has always given the Treasury anything it’s asked for, especially if the head of the Fed is appointed by the current POTUS.

If Biden was controlling the Fed and Treasury right now, one would assume because the Treasury is headed by Janet “print money like crazy with no worries” Yellen, she would be doing just that and adding to the Fed balance sheet. But the balance sheet shrunk the past year prior to the very recent banking fiasco. If Biden was controlling the Fed and Treasury right now, one would assume the interest rates wouldn’t have been raised so aggressively over the past year.

Biden has been put between a rock and a hard place. The COVID Stimulus jump started inflation. The Deep State cabal has painted themselves into a corner. They created a Scamdemic to get Trump out of office, and now they are having to deal with the ramifications of it. If they let inflation continue to rage out of control, it will kill the economy. If they aggressively raise interest rates to combat inflation, it will also kill the economy. The Deep State cabal basically tied a noose around their own necks, and Trump’s COVID stimulus package was the kicking out of the chair.

Whether Trump currently has some control over the Federal Reserve and Treasury or not, expect Powell to be the Democrats new “bad guy” very soon. Just as the Restrict Act is trying to “Trojan Horse” more government control over the people by claiming it stops the CCP from getting our information through TikTok, expect the Democrats to blame Powell as things continue to get worse.

The Democrats will say Powell created the recession with his out-of-control rate increases and by inappropriately reducing the Fed’s Balance Sheet. They will claim their progressive policies aren’t the reason our economy is in trouble. They’ll remind us that Trump was the guy that first appointed Powell. That Powell is a Republican, and Powell refused to prioritize climate change. Actually, the fact that Biden re-appointed a Republican that refuses to make climate change a priority kind of lines up with the idea Trump currently has some kind of control.

It’s possible Trump is keeping these progressives from abusing the Federal Reserve system to bail out their bad policies. In other words, he is letting us see how bad these policies are when they aren’t accompanied by Fed tools used to bail them out. I’m sure the Deep State cabal assumed they would have the US in a war by now to bail out the corrupt financial system, but in my opinion, they aren’t being allowed to get US military boots on foreign soil. The best they can do is support someone else’s war.

The experts say we will probably be in a recession later in the year, a year before the 2024 election. This would normally hurt the incumbent party. Parties aren’t usually re-elected during a recession. But if the media and Left can convince enough people that it’s all Powell’s fault, maybe they will stand a better chance.

Don’t fall for it.

What Powell has done over the past year, by raising interest rates and trying to reduce the Fed’s Balance Sheet, is the equivalent of a parent taking away their credit card from a spoiled, rotten child. A child that has no sense of what it means to actually earn money. In this case, it’s the rest of us that have to suffer for this spoiled child’s excessive spending. We are the ones that have to pay. I should also point out that not only do we have to pay the debt of these people, but they’ve also been stealing from us the whole time. We are basically having to pay off the credit card debt of someone who broke into our house and stole our belongings.

To recap, in the past 15 years, the only time any progress has been made in stabilizing and lowering the Fed’s Balance Sheet was during Trump’s pre-COVID presidency and over the past year during Powell’s interest rate hikes. The rest of the time, the economy has lived on pixie sticks and Red Bull. The rest of the time the economy has been artificially propped up to hide the destructive, progressive policies that have plagued our nation’s economy. If not for Americans’ innovativeness and hard work, the economy would have fallen apart long ago due to the parasites and leaches draining it of its blood.

Even with all the intentional damage done to the American economy by the progressive communists, it’s is still the strongest in the world. Imagine what it will be like when the leaches are burned off and the parasites are killed. I’m sure less people will be working two jobs to make ends meet. Likely, more people will be able to afford to buy a house. More Grandparents will be able to travel to see their Grandkids. Fewer parents will lose sleep wondering how they will be able to afford to put their children through college. More people will be able to enjoy life.

It will be a life more in line with what God intended us to have.

Badlands Media articles and features represent the opinions of the contributing authors and do not necessarily represent the views of Badlands Media itself.

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