What if Fed Transferred its Assets to American Citizens?

Apr 18, 2022 | Macro Insights

The Fed purchased about $5 trillion in assets (mostly different types of bonds) in order to provide liquidity to the financial markets post-covid, more than doubling the size of its balance sheet. In fact, the Fed’s balance sheet is up ~9x since the 2009 great recession. Now there is talk of the Fed “unwinding” its balance sheet by selling the bonds back to the capital markets which will act to shrink the money supply as buyers pay cash for their bond purchases.

What if instead of selling the bonds to financial institutions, the Fed was to gift these bonds back to American citizens?  After all, isn’t it our money that bought these bonds to begin with?

If the Fed was to gift $8 trillion (leaving it with $1 trillion) to 333 million Americans, this would mean a transfer of $24,000 for every American young & old. The Fed could create an $8 trillion mutual fund and every American would get their ownership share and collect the interest from the fund until all the bonds mature at which time everyone gets a $24,000 check.

Instead of shrinking the money supply, the Fed could help Americans shore up their own balance sheets.

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