“By the Time its New Steps Are Done, the Fed’s Balance Sheet Will Reach $4.5 Trillion, or About a Third of GDP”

Paul Krugman has been calling for more government intervention into the economy than just about anyone else.

Krugman is calling for stimulus in the US and European Union of 4% of GDP:

“My back of the envelope says on both sides of the Atlantic we should be having a stimulus that peaks at 4 percent of GDP annually …. The United States is not doing enough to fight the crisis and Europe is doing a bit less than half as much as the United States.

However, as noted in the Economist:

By the time its new steps are done, the Fed’s balance sheet will reach $4.5 trillion, or about a third of GDP, up from less than $1 trillion a year ago, Capital Economics estimates.

I understand that dollars spent on stimulus and the size of the Fed’s balance sheet do not necessarily have an exact correspondence. But the size of the Fed’s balance sheet does give an indication of the massive scale of Bernanke’s tinkering.

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  • I would guess by now we would all agree it’s going to take bunch to fix this mess. Here’s where all libertarian and Aussie School folks are going to freak out, the buying of long range bonds and they are talking of it being a trillion dollars worth before they are done, when multiplied by fractional banking system will be a 10 trillion dollar stimulus. It has always been a matter of time till the dollar gets dumped as the worlds currency, and it looks like now is the time. Lets hope the trillions will be funnelled quickly into alternate energy and mass transit, might wanna throw is some long range electric cars. projects for the price of oil will go through the roof if the dollar is dumped.The previous article says we must have hope ,and that one voice can change the heard, damn I hope so.