The Federal Reserve's balance sheet expands at a record pace
- The Federal Reserve's balance sheet is expanding at a rapid rate.
- In the last two months alone, the Fed has bought more assets than during the entire Great Recession
- Some argue that the Fed's actions will lead to inflation in the long run.
The Federal Reserve is buying back assets and its balance sheet is growing rapidly, especially over the past two months. Currently, the Fed buys about $41 billion in assets on a daily basis, and central banks around the world are also following in this vortex.
According to an analyst at prime xbt , the economic point of this is pretty clear: inflation is coming.
The Fed is buying in bulk
The current spike in the Fed's balance sheet hasn't slowed since March. In fact, it's only picked up speed, and the result could be an unprecedented surge of inflation. This is what analyst Mati Greenspan (@MatiGreenspan), founder of Quantum Economics, told his followers recently.
As shown below, the gray area is the most recent recession (2008). Since then, the Fed's balance sheet has returned to steady growth. And the worrying thing is, it has really spiked in the last two months.
However, despite these concerns, inflation has yet to come. The dollar is in fact stronger than ever. The real crisis, at the moment, appears to be deflation.
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3. Inflation or deflation?
As BeInCrypto recently reported, the fear is that in the short term we will see a deepening deflationary spiral. Global prices fell as demand was low, businesses struggled to stay profitable. Typically the consequences of the global collapse in oil prices.
For now, most economists aren't worried about inflation. However, according to some, they should put their mind to it. The inflationary period will usually come after deflation, and it all depends on how the Fed responds to the current crisis.
BeInCrypto reached out to Mati Greenspan for his thoughts on the matter. He said that in the short term, there will be deep deflation. However, as things begin to return to normal, the Fed's actions will likely be the catalyst for serious inflationary problems.
“During the shutdown, we are in a period of low demand for commodities. But once we start moving and shopping again, the money that has already been created won't go away."
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