The decision is in: Unlimited quantitative easing. That was the
announcement from the Federal Open Market Committee this afternoon,
launching a third round of purchases of securities in a bid to
boost the economy and reduce unemployment. This time, Federal
Reserve Chairman Ben Bernanke and crew are pledging to buy
$40 billion per month until the economy improves. The Fed's
policy committee also extended its zero-interest rate policy until
“at least mid-2015.” If QE3 lasts that long, the Feds will be
printing at least another $800 billion to buy mortgage-backed
securities.
It won’t be a surprise to read conservatives lambasting this as unconventional monetary policy meant to help re-elect President Obama. And inflation hawks have already started screeching. But the loudest cry of “for shame” should be coming from the Occupy Wall Street movement.
Quantitative easing—a fancy term for the Federal Reserve buying securities from predefined financial institutions, such as their investments in federal debt or mortgages—is fundamentally a regressive redistribution program that has been boosting wealth for those already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy. It is a primary driver of income inequality formed by crony capitalism. And it is hurting prospects for economic growth down the road by promoting malinvestments in the economy.
How is the Federal Reserve contributing to regressive redistribution, income inequality, and manipulated markets? Let’s flesh this out a bit.
Last month, Bernanke said that quantitative easing had contributed to the rebound in stock prices over the past few years, and suggested this was a positive outcome. “This effect is potentially important, because stock values affect both consumption and investment decisions,” he argued, apparently under the belief that the Fed has a third mandate to support rising stock prices.
Read more: http://reason.com/archives/2012/09/13/occupy-the-fed
It won’t be a surprise to read conservatives lambasting this as unconventional monetary policy meant to help re-elect President Obama. And inflation hawks have already started screeching. But the loudest cry of “for shame” should be coming from the Occupy Wall Street movement.
Quantitative easing—a fancy term for the Federal Reserve buying securities from predefined financial institutions, such as their investments in federal debt or mortgages—is fundamentally a regressive redistribution program that has been boosting wealth for those already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy. It is a primary driver of income inequality formed by crony capitalism. And it is hurting prospects for economic growth down the road by promoting malinvestments in the economy.
How is the Federal Reserve contributing to regressive redistribution, income inequality, and manipulated markets? Let’s flesh this out a bit.
Last month, Bernanke said that quantitative easing had contributed to the rebound in stock prices over the past few years, and suggested this was a positive outcome. “This effect is potentially important, because stock values affect both consumption and investment decisions,” he argued, apparently under the belief that the Fed has a third mandate to support rising stock prices.
Read more: http://reason.com/archives/2012/09/13/occupy-the-fed
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