Expert: Federal Reserve Enables Gov’t Financial Irresponsibility, Massive Debt

One economic researcher broke down exactly how the Federal Reserve helped the federal government spend our taxpayer dollars profligately, adding massive amounts of debt.

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Paul Mueller, a senior research fellow at the American Institute for Economic Research, wrote for Fox Business how the Federal Reserve assisted in driving up government debt starting in 2008 under Obama and continuing now under Joe Biden. Mueller compared Federal Reserve Chair Jerome Powell to the “Wizard of Oz” in trying to appear very calm and optimistic while, behind the curtain (figuratively speaking), the serious issue of unsustainable government spending lurks, causing economic catastrophe.

The economic crises under which America suffers, illustrated by the “weaker-than-expected jobs report” and increased unemployment, are driven by federal spending enabled by the Federal Reserve, according to Mueller. The Federal Reserve has an unchanged interest rate target and appears to have no idea what it is doing or should do, Mueller added.

He wrote, “The Fed has enabled reckless government borrowing – which has shackled us and our children with a mountain of debt that becomes more costly every year. The Federal Reserve began increasing its balance sheet after the 2008 financial crisis, meaning they increased the money supply to make borrowing cheaper and easier.” This decision then “enabled the government to spend like a drunken sailor and suffer no consequences. In that time, the federal debt grew to an unbelievable $23 trillion!”

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The national debt is now above $34 trillion, and the government has to spend $1 trillion annually just to service the debt. Indeed, the only economic “growth” under Biden is government spending — i.e., government (and thus taxpayer) debt. The American taxpayer simply cannot sustain that — we’re headed for economic catastrophe.

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Mueller explained further:

The Fed began shrinking its balance sheet in August 2022 by allowing maturing securities to “roll-off” the balance sheet instead of being reinvested. This “balance sheet normalization” plan allowed up to $35 billion of agency debt and mortgage-backed securities (MBS) and up to $60 billion of Treasury securities to “roll-off” the balance sheet each month. 

While this plan reduced the size of their balance sheet by $1.5 trillion over the past 20 months, it remains large at $7.4 trillion. Yet Fed officials decided to slow the balance sheet reductions by $35 billion per month. In effect, the Fed has reduced the pace of quantitative tightening by 50% or more. At this new pace, the balance sheet would still be a whopping $6.9 trillion by the end of next year. 

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While the Federal Reserve balance sheet, for most of its history, was under a trillion dollars, Mueller wrote that it was “only” $4.5 trillion in Jan. 2020. As noted above, it’s now much higher. The Fed has not since been addressing this problem sufficiently, seeming to either ignore it or see it as less of a threat than it is. Thanks to that balance sheet, the Fed is able to bail out financial institutions without consequences to itself, even as the balance sheet ensures the continued increase in debt by creating huge amounts of liquidity, Mueller noted.

All the elites seem to be working together to benefit themselves while literally bankrupting the American people.

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