• By The Financial District

Fed's Plan To Combat Recessions Benefits The Rich, Author Claims

In 2008, when the real-estate bubble burst and the whole world staggered on the precipice of total economic disaster, the Federal Reserve leapt into action to try to save the economy.

Photo Insert: When the Fed wants to create money to spur spending and combat recessionary influences, they supposedly buy large amounts of treasury bills from two dozen huge financial firms, Wells Fargo being one of them.

The planet's most powerful people — world leaders, the media, heads of elite institutions — basically had to helplessly stand by and watch the Fed, Paul Constant reported for Business Insider.

Created in 1913, the Fed is a system made up of 12 powerful banks headed up by a single main office in Washington, DC. "The Federal Reserve is the central bank of the United States," business reporter and author Christopher Leonard said on the latest episode of Pitchfork Economics.

"Their job is to basically create dollars — that's the Fed's superpower. It can create new dollars out of thin air and it manages our money supply." The subtitle of Leonard's new book "The Lords of Easy Money" might give you a hint about how he thinks the Fed's action paid off: "How the Federal Reserve Broke the American Economy."

In his book, Leonard suggests that the Fed's policies helped create the conditions for the 2008 economic collapse in the first place and that the decade of low wages and raging economic inequality we saw in America's lackluster recovery from the 2008 recession was entirely the Fed's fault.

All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

The problem wasn't in the creation of new money, Leonard argues — the problem was where that new money went and who was in charge of distributing it. Widespread consumer demand is what creates jobs and grows communities. The Fed would do more to encourage true economic growth by creating money and getting it directly into the hands of the American people.

"There's this group of 24 banks on Wall Street — financial institutions like JP Morgan, Goldman Sachs, Wells Fargo," Leonard said. When the Fed wants to create money to spur spending and combat recessionary influences, he added, they buy large amounts of treasury bills from those two dozen huge financial firms.

Government & politics: Politicians, government officials and delegates standing in front of their country flags in a political event in the financial district.

Of course, the problem with this system should be apparent to anyone who's witnessed the repeated failure of trickle-down economics to spur the economy over the last four decades: Giving money to the richest Americans doesn't create economic growth.

"The top 1% of our country owns 40% of all our assets. The bottom half of all Americans only own 7% of our assets," Leonard said.

Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

"The Fed is pumping up asset prices, which really benefits a tiny group of hyper-rich people. And at the same time, it creates these asset bubbles that inevitably collapse, as we saw in '08 and 2020."

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