Wow! Federal Reserve to pay U.S., foreign banks $12.2 billion in 2016

Between 2008 and 2015, the Federal Reserve acquired more than $4 trillion worth of bonds. Indeed, a lot of money was printed and now the Fed maintains an astronomical balance sheet.

In order to keep the money it printed as part of its quantitative easing initiatives since 2008, the Fed will pay United States and foreign banks a minimum of $12.2 billion next year, according to Yahoo! Finance.

That’s right. In 2016, the U.S. central bank will dole out billions just to keep the inflation out of the national economy. If the Fed does increase rates as it intends to do throughout next year, the amount will grow to $23.1 billion. Essentially, the many who warned about inflation are already correct, but the central bank is just suppressing a major part of it and delaying the inevitable inflation for another time.

To combat the circulation of the exorbitant amounts of money and the inevitable price inflation, the central bank pays an interest rate of 0.50 percent, which is higher than the market interest rate, to banks on reserves held at the Fed. In other words, financial institutions have about $2.5 trillion at the Fed and are paid $34.5 million each day in interest.

Since the Fed intends to raise rates next year, payments to banks next year would rise to $103.6 million per day.

Here is a salient remark from the news outlet:

“After six years of near-zero interest rates, the Fed is in uncharted territory. Never before has a central bank attempted to raise rates after having provided so much stimulus and expanding its balance sheet to such a degree. The legacy of the Fed’s quantitative experiment is largess to banks and funds that will likely total $24 billion in 2016.”

When people ask the question: where’s the inflation? This is part of the answer. But of course there’s already so much price inflation going on across the U.S. that it’s pretty difficult to avoid.

Indeed, this should be bigger news than it is. Everyone should be talking about this, particularly Donald Trump since he has a huge platform right now. Let’s hope this makes it to the next GOP debate and someone, anyone, whether it’s Rand Paul or Ted Cruz, brings up just how powerful the Fed is.