The Federal Reserve’s Response to COVID-19

John Maynard Keyes once said, “I do not know which makes a man more conservative — to know nothing but the present, or nothing but the past.”

It is hard to say which is weighing more heavily on Fed policy makers in the midst of the global pandemic of 2020: the opaque view of the world in the time of COVID-19 or the still fresh memory of the Great Recession of 2007–2009.

Regardless of the direction of their vision, one might imagine that even the father of Keynesian economics would be at least a little uneasy about the breadth and speed of the aggressive actions the US Federal Reserve has taken in recent weeks to shore up the economy in the midst of a global pandemic.

Federal Reserve Chairman Jerome Powell has stated firmly and clearly that the Fed will lend as much as it can across the U.S. economy to keep liquidity and credit flowing through the duration of the pandemic. “When it comes to lending, we’re not going to run out of ammunition. That doesn’t happen,” Powell said.

While the Fed’s balance sheet still hasn’t fully recovered from the previously unprecedented Quantitative Easing used to prop up the economy after the Great Recession, the U.S. Federal Reserve is working to show that it has as much ammunition as a gun-toting hero in an action movie from the 1980s.

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