One of the big differences is how Fed and Fiscal policy has lined up in this recession.
Here’s a graph of the amount of money printed by the Fed and the percentage of that amount that has been spent by the Fiscal Government.
Two things stick out:
- The Federal Reserve has printed WAY more money in this recession – more than double what they printed in the Financial Crisis
- The Government has been spending this money. In 2007-9, through 4 months, the Government has only spent about 25%, or $300 billion. In this recession, the Government has spent 70% or almost $2 TRILLION dollars.
The spending by the US Government so far in this crisis has been huge. It’s the reason incomes are still OK. It’s the reason deposits are up. It’s the reason people have been paying their mortgage and rent.
If the new stimulus bill is $1 trillion, then the Government will have spent all $3 Trillion the Fed printed. Unfortunately, that may not be enough as the recovery of the economy has stalled.