The Age of QE

We are approaching the end of year six of the regime of Quantitative Easing (QE) engineered by the Federal Reserve under Fed chairmen Ben Bernanke and now Janet Yellen. In place of responsible economic policy to revive economic growth and employment, we have had QE and the explosive growth of job-killing regulations (including Obamacare). In a recent look back at QE, New York Post columnist John Crudele credits QE with some good effects, but adds this inarguable observation, consistent with the avowed goals of QE:

There’s one more thing that QE accomplished: it has made the stock market soar. Interest rates have remained so low for so long that investors have had no other choice but to move their money into the stock market, thus creating a bubble.

Even those adverse to risk were forced to chase the better yields in stocks, no matter how dangerous that was.

But for every winner in QE there are 99 losers. While the richest 1% of the US population has been loving the rise in stock prices and other QE amenities, Fed policy has been taxing on the masses of savers.

In fact, “tax” is a perfect word. QE has been an invisible tax on savers beyond anything Washington could have ever conceived.

Every dollar that has benefited a borrower during QE has come out of the pocket of a saver in the form of a lower return on [his] assets.

In fact, QE is now widely recognized by both supporters and opponents as causing the single largest shift ever in wealth, from middle class savers to rich Wall Street investors.

And that this should have happened under a Democratic president who came into office championing wealth redistribution in the other direction is both shocking and ironic.

I don’t know if all that is exactly right — Ramesh Ponnuru mounted a defense of QE3 addressing some of these issues in 2012 — but the silence around the phenomenon of QE is notable. You would almost think it must be accounted an unalloyed good that the banks have been recapitalized on the backs of middle class savers, and perhaps it is, though it’s hard to see how it all ends well.

It is late in the day to have a debate over the policy, yet it is overdue. There must be a good populist case to be made against it. As I say, I don’t pretend to know the right answer, but the headline of Crudele’s column suggests what the populist case would sound like: “Obama’s $4 trillion gift to the rich.”

UPDATE: A reader recommends this guest post at Zerohedge: “How the Federal Reserve is purposely attacking savers.”

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