Not a forecast of the next female monarch in England, nor the newest luxury liner in the Cunard Line.
“Quantitative Easing” is a monetary policy used by central banks (such as the Federal Reserve System in the USA) when they’ve become desperate. The bank purchases assets (stocks, bonds and other ‘financial paper’) mostly from banks. The stated intent is that this frees up cash for the banks to lend while removing stocks and bonds from the market which supposedly increases the value of stocks and lowering the interest paid (‘yield’) on bonds.
Of course, banks don’t need help ‘freeing up cash’ – banks are making great profits (after paying obscene salaries and bonuses to the upper echelon) from taking virtually-free money from the Fed and investing in bonds (including government ones) that pay interest well above the cost of those Fed loans. Why would these banks risk investing in small businesses and individuals?
And large corporations don’t need to borrow money; they are sitting on massive amounts of cash, paying taxes that are nowhere near the nominal ‘corporate tax rates’ while laying off workers to export those jobs overseas. The new jobs that are being created are top-heavy in minimum wage positions; often part-time with minimal (or no) benefits.
Adding to that is the risk of deflation- as consumer spending dries up it is very difficult for retail outlets to raise prices: “Amid sluggish consumer spending, businesses have been reluctant to hire and the economy has grown at a snail’s pace. At the same time, inflation is dangerously low, causing some economists to warn that the United States may even be flirting with deflation — a debilitating drop-off in prices and demand.” (source)
That same article reports that the first round of “Quantitative Easing” topped out at $1.8 trillion dollars, while QE2 was announced at $900 billion. That is, almost three trillion dollars given to large banks and major players in the stock market. The results; Bank Profits Soar And Corporate Bonuses Swell As Broader Economy Stagnates.
And it’s not just us ‘average people’ in mid-America that think QE3 would be a disaster:
“We have a negative opinion of QE2, and believe QE3 could very well turn out to be ineffective at best, and counter-productive at worst,” said Stephen Jen, managing partner of London-based hedge fund SLJ Partners.
“If we are right, QE will be self-defeating in that the more the Fed eases, the more commodity prices rise, which erodes the capacity of consumers to spend on non-energy products and services.” (source)
Sadly, there are too many people still bound up in their blind faith in a ‘free market economy’ that hasn’t existed for decades (if ever it did). People who ignore the lessons of the 1920s and 30s, as well as the 1970s and 80s. People who can say “job-killing tax increases” as if that was a real thing. People who say that giving corporations even more free money through even lower tax rates would lead those self-same corporations to hire workers (full-time, at decent pay, here in the USA) and not use those funds to pay higher bonuses or replace their 5 year old ‘corporate campus’ or fleet of executive jets.
If the goal of the Fed truly is to increase economic activity, than using funds to extend unemployment insurance, bail out homeowners who are ‘under water’ and/or to pay for my $500 Billion Plan would have more immediate, more beneficial and more humane results.