Federal Reserve balance sheet exceeds $5 trillion

Source: https://fred.stlouisfed.org/series/WALCL

As you can see, the Federal Reserve balance sheet declined to a low of $3,759,946,000 on 8/28/19, then it increased because the overnight financing plumbing broke.  It increased to $4 trillion as of 10/30/19.  Then it increased slowly until we get to $4,158,637,000 on 2/26/20.  Since then the increase has gone vertical, hitting $5,254,278 as of 3/25/20.  The Fed is buying up the entire inventory of the primary dealers so they will have cash to purchase the gigantic $2 trillion in Treasury notes and bonds that will be issued shortly to pay for the coronavirus bailout (that just passed the House and Senate but hasn't yet been signed by President Trump).  The Fed balance sheet will likely exceed $6 trillion within just a few weeks.

I started this blog many years ago because I was concerned about the increase in the national debt and to try to make sense of it.  So it seems that the increase in the national debt without an increase in the Fed balance sheet ("Fiscal Irresponsibility") is not inflationary - it is debt that has to be paid back and this may even be deflationary.  It also seems that an increase in the Fed balance sheet without an increase in the national debt ("Quantitative Easing") is not inflationary because it is just exchanging one asset (Treasury debt) for another (Fed dollars).  However, this money goes into the stock market. 

But what about when both the Fed balance sheet and the Treasury debt ("Helicopter Money") increase rapidly?  This certainly will be inflationary, especially when you consider that the supply side is being constricted by unemployment.  But how much inflation are we looking at?  The debt held by the public will increase from $17.5 trillion to $19.5 trillion, an 11% increase.  So that is probably what we should expect.  The question is, is this just a one-time event or will the inflation continue?  I think it would be very difficult to put the inflation genie back in the bottle.  So we should expect 10% inflation and $2 trillion annual deficits as a baseline from here on out.  And this will affect the forecasts which are being prepared as much as 75 years in the future.  (I am waiting for the CBO to issue a new long-term projection before doing another forecast, which will probably be in June).