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Here Are the Many Ways the Federal Reserve Is Controlling the Markets

The Federal Reserve is running the show.

The Federal Reserve is running the show. 

The stock market is up well over 200% from its low in March 2009.

How did we get this kind of rally? It turned out the Federal Reserve had some tricks up its sleeve. The flashiest trick - the one you are probably most familiar with - was cutting interest rates to near zero. Lower interest rates made it cheaper for big and small businesses to borrow money, invest in themselves and hire more workers.

But the Fed's other big trick here was something called quantitative easing. The Fed bought bonds - lots of bonds - and they bought them mostly from banks.

So, why was the Fed so desperate to help the banks at that point?

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Because banks could now use the proceeds from selling bonds to the Fed to lend out money to people like you and me, and businesses of all sizes.

The hope here is it will lead to more jobs to chip away at that sky high unemployment.

But, the Fed's balance sheet is now about $4.5 trillion, compared to about $1 trillion before the crisis. This year, this Fed has essentially vowed to start shrinking its balance sheet.

Why? The economy is growing!

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