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The U.S. Federal Reserve has had a lot of money to play with.
But the central bank's costliest monetary decisions have occurred just within the past decade.
This may not come as a surprise, considering the Great Recession started roughly 10 years ago.
Arguably, monetary policy is the central bank's most important responsibility. After all, the Fed's monetary policy decisions are all-encompassing: They affect average Americans, big banks, small-time investors, and Wall Street bigwigs alike.
And we put all of this power in the hands of the Fed. And it has not been shy about using it.
Here's a look at the Fed's three most expensive decisions in history…
The Federal Reserve's Most Expensive Decisions, No. 1: Inflating Its Balance Sheet
In 2008, the Fed held less than $500 billion on its balance sheet.
But then the Great Recession hit.
By March 2010, the Fed had purchased $1.75 trillion in mortgage-backed securities, federal agency debt, and long-term Treasury securities, more than quadrupling its balance sheet to over $2 trillion.
The rabid snatching up of debt didn't stop there. Even in 2013, the Fed was still buying up these assets because the U.S. recovery was not moving as quickly as the FOMC would have liked.
By 2015, the central bank had bought up so many securities that the balance sheet had reached an unheard of $4.5 trillion.
That's an 800% increase in seven years.
These protracted monetary policies – which finally stopped in 2014 — panicked taxpayers who were worried about the effects of falling interest rates on their savings accounts.
In the long term, many analysts are worried about the dangers yet to be seen by the inflation created by quantitative easing (QE). Historically speaking, economic theory surmises that a rapid increase in money supply eventually results in higher inflation.
The Dallas Federal Reserve branch released a cost analysis in 2014 that concluded with a sort of admission of guilt on the central bank's part – it had produced dire problems that "society must deal with":
"Although unprecedented fiscal and monetary action in the throes of panic during 2008-09 may have prevented a full-blown depression, such intervention did not come without significant costs. Society must deal with the consequences of a swollen federal debt, an expanded Federal Reserve balance sheet, and increased regulations and government intervention for years to come."
But the Fed made an even costlier maneuver amid the crisis that the public almost didn't know about…
The Federal Reserve's Most Expensive Decisions, No. 2: Trillions in Secret Loans
In July 2010, U.S. Sen. Bernie Sanders (I-VT) requested the first ever top-to-bottom audit of the Federal Reserve.
The audit was conducted by the Government Accountability Office (GAO). And though investigators weren't allowed to view most of the central bank's monetary policy decisions at that time, they did turn up receipts for a loan of extraordinary proportions:
A whopping $16 trillion in secret bailout funds.
That's right; the Fed had loaned out an amount of money that, when totaled, was greater than the national debt – all to corporations and banks around the world to keep them from collapsing.
The institution did this in order to prop up the global fiat empire – a.k.a., to keep the currencies backed by their national governments worldwide from losing all value.
But Sanders argued that it was just a bailout to keep the world's "one percenters" afloat.
Indeed, details of the GAO's final report suggested as much.
For example, its report found that on Sept. 19, 2008, William Dudley, who is now the New York Fed president and vice chair of the FOMC, was granted a waiver to let him keep investments in American International Group Inc. (NYSE: AIG) and General Electric Co. (NYSE: GE) at the same time AIG and GE were given bailout funds.
Must See: An incredibly rare gold anomaly is shaping up in the markets as we speak — one that has occurred ONLY twice in the past 20 years. And it's about to happen again. Details here…
This means the Fed was not only keeping GE and AIG afloat, but it was keeping its own vice chair nice and comfortable, as well.
One reason the Fed didn't make Dudley sell his holdings, according to the audit, was that it might have created "the appearance of a conflict of interest."
Apparently, actually having a conflict of interest is better than appearing to have one.
But the Fed's scheming didn't stop there.
In fact, according to the GAO's findings, the Fed had provided conflict of interest waivers to all employees and private contractors so they could keep investments in the same financial institutions and corporations that were given portions of this $16 trillion bailout loan.
All this happened while average investors were still struggling to put their own finances back together. In 2011, for example, unemployment was at 9.8%. Some 2 million homes were also lost that year, on top of the 6.8 million homes lost in the recession overall.
The Federal Reserve's Most Expensive Decisions, No. 3: Unwinding the Balance Sheet
Since the recession, the Fed has bought $1.7 trillion worth of mortgage-backed securities (MBS) from the market as part of its QE strategy.
This massive influx of cash, along with the lower interest rates and stabilization that came along with it, kept the economy from collapsing further.
That's a costly decision, but it's undoing that decision that might be truly expensive. In fact, the aftershocks of this move could have a dire impact on markets around the world. It could be expensive for everyone.
You see, the Fed rarely owned mortgage-backed securities before the financial crisis, so now that the central bank wants to "run off" its $4.5 trillion balance sheet, the mortgage-backed securities will be the first to go.
But the Fed owns one-third of the market, according to Bloomberg on Feb. 5, 2017. Because of the Fed's newly outsized role in the MBS sector, the vast majority of transactions have been done by just a handful of dealers.
The question is: Will investors like foreign central banks and commercial banks be able to absorb all that superfluous supply once the Fed bids the market adieu?
This could be a very expensive move, indeed.
One thing is for certain: The Fed's sheet-balancing maneuvers this fall will incite market volatility.
But that doesn't have to be a bad thing. Money Morning Technical Trading Specialist D.R. Barton, Jr., thinks this could be a nice profit opportunity for readers…
The Fed-Induced Market Volatility This Fall "Will Help Out a Lot"
D.R. told CNBC on July 14 that "volatility is going to help out a lot."
For example, D.R. believes that anyone who buys one or all of the "Fab Five" tech stocks amid this downturn will be very happy they did later on.
Market volatility could send these share prices dipping, essentially putting them on sale.
This strategy "fits in perfectly with our thesis that you want to buy quality, fundamentally strong stocks when the bears come out to stretch their legs," D.R. said.
Check out his interview with CNBC below…
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