What did the Fed learn from the 2008 Financial Crisis that they are applying now for our benefit and COVID-19? We were very interested to see so we did some research. Did the federal reserve learn and improve? The answer is yes. There are 4 ways that the Federal Reserve is reacting to COVID-19 better than they did the Financial Crisis of 2008. Here are the 4 ways we see that they have made a difference:
- They’re reacting faster. In the Financial Crisis, it was unknown what sort of inflationary impact it might have since it was such an unusual event. The Fed was learning as they went along with the rest of us, so there was a little bit of a delay in their response. With the Coronavirus, it’s a health-related pandemic but their response has been immediate.
- The Feds response has been broader. During the Financial Crisis, they aimed at just the subprime mortgage issue, but it has been much broader this go around.
- This time they have made it clear how important it is to keep people employed. That was not the case after 2008 and it took quite a while, almost 10 years, for the unemployment rate to get back to a low, normal rate. Looking at everything that the Treasury and the Fed are doing, it’s mainly aimed at employment which was not the case in 2008.
- Quantitative Easing became a thing after 2008 and proved to work very well. This time, the Fed is using it on a much boarder spectrum.
In summary, the Fed is moving faster and more broadly. They’re making quantitative easing much broader and the most important thing is that they’re really aiming hard at keeping people employed through the SBA and the CARES Act. Those are the four ways that they have improved on that is being used to our benefit. There’s a saying that experience goes a long way and we are seeing that to be true with the Fed and how they are handling the pandemic today.
Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
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