Commentary
The Federal Reserve—and central banks the world over—played a crucial role in making lockdowns possible and weaponizing the panic of politicians. As the lender of last resort and the provider of liquidity for the entire federal government, it removes normal fiscal restraint. It writes checks that cannot bounce to fuel governments in normal times but is always ready to make possible emergency spending too even if existing revenue and public consensus is otherwise absent.
Starting with the $2.2 trillion CARES act of March 27, 2020, and continuing for a full year, Congress massively subsidized and hence funded and rewarded states that locked down, enabling stimulus payments to businesses and individuals amounting to some $10.4 trillion over two years. It was all funded by debt that the Federal Reserve added to its balance sheets, even while the Fed drove interest rates back to zero in the hope of avoiding economic collapse….