Interestingly, the asset side of the Federal Reserve’s balance sheet reached the $3 trillion last week on the day before the release of the 2007 FOMC meeting transcripts that showed a central bank largely unaware that a recession was about to begin in December and of the impending doom of 2008.
One can only imagine what conditions will be like in another half-decade or so when transcripts for the 2012 and 2013 meetings will be released and the world learns of the internal debated over a massive balance sheet expansion known as QE3/QE4. My guess is that Fed officials will be seen as woefully underestimating the impact that their balance sheet expansions would have.