From where does the Federal Reserve get the trillions of dollars that it uses to prop up the economy through buying debt, stocks, and toxic assets from governments and corporations?
Since 2008, the Federal Reserve has frequently engaged in a policy called quantitative easing [QE]. This has involved buying more than $6 trillion in debt, stocks, and toxic assets from governments and corporations. In the words of Ph.D. economist Benn Steil, the Fed implements QE mainly "with newly conjured dollars" that it creates electronically. During and after the Great Recession of 2007 to 2009, the Fed conjured about $3.5 trillion in new money, and many economists were concerned that this would stoke inflation, but the Consumer Price Index grew more slowly than in the preceding 4 decades. However, the prices of assets like stocks and real estate increased dramatically, a phenomenon known as asset inflation. Asset inflation increases the wealth of those who already own assets, while making them unaffordable for others. From 2007 to 2016, the inflation-adjusted median net worth of U.S. families declined for all wealth groups except the top 10%.