Federal Reserve (02:14)
The price of stocks skyrocketed during the COVID pandemic when many Americans were out of work. The financial world has become drastically different than the real world and the Federal Reserve is at the center.
2008 Financial Crisis (05:23)
President Barack Obama used the Federal Reserve to restart the American economy after the 2008 crisis. The Fed dropped interest rates to almost zero and used quantitative easing. QE expanded the Fed's power by allowing it to buy things with bonds.
Stock Market Rally (04:24)
The Feds gamble with QE worked and the stock market rallied. Riskier investments, like stocks, became more attractive while the interest in safer investments, like bonds, went down. It showed the power of the Fed, but it did not impact the wider economy as much as hoped.
More Quantitative Easing (06:00)
The Fed hoped Congress would fix the imbalance in the economy, but newly elected Tea Party Republicans blocked it. The Fed decided to do another round of QE, but many worried it could cause inflation and greater wealth inequality.
Taper Tantrum (02:44)
By 2013, unemployment was down and there were signs of improvement in the economy. Chairman Ben Bernanke said the Fed would "taper" the amount of QE, which caused chaos in the stock market. The next year, the Fed paused QE, but keep interest rates low.
Wealth Gap (03:13)
By 2018, unemployment had stayed low, but the wealth gap continued to grow. The Fed continued its practices because of the unemployment rate, not considering the low wages of most Americans and slow growth of the economy as a whole.
Stock Prices (04:42)
Corporate debt increased and corporations used bonds to buy back their own stock. It made the remaining stocks more valuable without improving anything for most workers at the corporations.
Financial Growth (04:04)
The Fed's actions benefited the financial industry more than the average American. Many worried about financial collapse and the risks of shadow banks.
Impact of Pandemic (05:29)
By the start of 2020, it was clear the COVID-19 pandemic would drive the global economy. Financial markets began to plunge as uncertainty made everyone opt for cash. After lockdown, the Fed returned to QE and began buying corporate debt.
During COVID-19, the Fed was criticized for its use of bailouts, especially for the junk bond market. The Fed was accused of undercutting the free market and rewarding risky behavior.
Investing in the Stock Market (05:53)
The Fed continued to pump more money into the economy with QE. Billionaires grew their wealth by $1.3 trillion in one year and the number of small investors greatly increased.
Financial Future (03:20)
Many people worry the Fed has raised asset prices too high. Today, there are signs of inflation throughout the economy. The Fed is considering tapering QE and raising interest rates in 2023.
Credits: The Power of the Fed (00:60)
Credits: The Power of the Fed
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