Currently, the Fed is injecting liquidity into the markets and economy at a record pace. While liquidity does have positive short-term benefits, is the Fed walking into a trap?

The Unseen

Over the last decade, the Federal Reserve, and Central Banks globally, have engaged in never-ending “emergency measures” to support asset markets. While the stated goal was that such actions were to foster full employment and price stability, there has been little evidence of success.

The chart below shows the expansion of the Fed’s balance sheet and its effective “return on investment” on various aspects of the economy. No matter how you analyze it, the “effective ROI” has been lousy.

Fed Trap, #MacroView: Is The Fed Walking Into A Trap?

Fed Trap, #MacroView: Is The Fed Walking Into A Trap?

These are the unseen consequences of the Fed’s monetary policies.