As of the week ending September 3, 2008, the Fed’s balance sheet stood at $906 billion, a level it had taken since 1914 to build up.
Now, driven by the panicked demands for relief from Wall Street speculators and their agents occupying the U.S. Treasury department, the Fed pumped out fresh cash at the rate of $700 million per hour, adding another $900 billion to its balance sheet in just seven weeks. Ninety-four years of reasonably deliberative history was thus replicated in three fortnights of panic inside the Eccles Building.
And still the madness continued. After 13 weeks the Fed’s balance sheet stood at $2.25 trillion, nearly tripling in the blink of a historical eye. This mad money printing was supposed to jump-start the Main Street economy but it couldn’t. After a three-decade borrowing spree, household debt of $13 trillion represented 200 percent of annual wage and salary income, compared with a pre-1980 average of 80 percent. Likewise, business sector debt had soared from $4 trillion to more than $11 trillion in the decade leading up to the crisis.