The Fed’s Growing Bubble

Quantitative Easing: has it eased anything? The answer is yes, though you might be more surprised to find out what it has actually eased. Behind the shiny economic recovery badge are a few startling facts.

Emmanuel Saez is an economist who works for the University of California. Mr. Saez took the time to investigate where the gains from QE have ended up, and the answer was in the pockets of the top one percent. To quote Saez, from “2009 through 2012, 95% of all U.S. income gains went to the top one percent.” These sorts of fact have lead Sound Money Campaign and others to label QE as the next trickle-down policy.

Quantitative Easing: Behind the Smoke and Mirrors

The Federal Reserve unleashed Quantitative Easing to help bolster the sagging U.S. Economy. It is a program in which the Fed prints money and buys $85 Billion worth of bonds per month. That figure has not dropped by 10% as the Fed has begun to implement tapering of its program.

When the Fed prints money and sends it into the market place, the value of money drops, and along with that the interest rates also drop. This means that corporations can borrow money for next to nothing. The popular term is called “Free Money” because the interest rate is so low. Free Money was marketed as a way for corporations to expand, create jobs, and help to stimulate the economy.

Quantitative Easing was supposed to help the everyday person be able to afford to buy a home, open a business, and invest into the American Dream. Very little of that actually happened. Corporations borrowed a great deal of free money, but very few spent that money on growth or expansion. Instead, they used that money to buy up their own stocks. Banks set the requirement on lending so stringently that the common person did not qualify for housing loans, small business loans, etc.

The Fed actually pays banks to keep their money on deposit at Fed. In short, banks are making interest income with zero risk. Why would they want to lend their money to anyone who potentially could become a risk? The result was that the housing market floundered and then slightly recovered. The Job market, also, did not improve. We look at corporations, the buying back of their own stock did nothing for the economy. It did a great deal for their leaders and investors.

We are all well aware of the word dilutions. Well, the opposite of dilution is concentration. When corporations buy back their own stock, they are reducing the number of shares. Fewer shares mean better return on investment for investors who hold those shares. It also means bigger salaries and bonuses for the top brass. So investors were paid more and corporate leaders were paid more, but the general public received nothing. There were no new jobs.

Quantitative Easing has been nothing more than a payoff awarded to the One Percent. $85 Billion dollars a month for years paid to the One Percent. This has been the biggest transfer of wealth to the richest Americans in history. That money, however, was not a free gift, for it has been paid for by the middle class and the poor, and it will continue to be paid for by the middle class and the poor.