Do you detect much difference between Yellen and Bernanke? More of the same? I see others agree with me that the net result of QE has been to make the rich richer. The stock market is higher. Bankers still pay themselves fat bonuses even though banks are weak and many loans they issued in the past are non performing or pay low interest rates. Bank capital is too small compared to the size and riskiness of bank assets. But the QE $ have helped bankers boost their capital and keep their banks alive until the next crisis and bailout.
I attach graphs showing that most of the $2 trillion the fed spent on QE1 QE2 QE3 have become bank deposits at the Fed, not new loans that might stimulate the economy. Bankers hoard money in their own accounts instead of loaning it out. Money supply has stayed growing at about the same rate along with the population and economy.
In May 2013, Federal Reserve Bank of Dallas President Richard Fisher said that cheap money has made rich people richer, but has not done as much for working Americans. Most of the financial assets in America are owned by the wealthiest 5% of Americans. According to Fed data, the top 5% own 60% of the nation’s individually held financial assets. They own 82% of individually held stocks and over 90% of individually held bonds.
In November 2008, the Federal Reserve started buying $600 billion in mortgage-backed securities. By March 2009, it held $1.75 trillion of bank debt, mortgage-backed securities, and Treasury notes, and reached a peak of $2.1 trillion in June 2010.
The only member of the Federal Open Market Committee to vote against QE3, Richmond Federal Reserve Bank President Jeffrey M. Lacker, said “The impetus … is to aid the housing market. That’s an area that’s fallen short in this recovery. In most other U.S. postwar recoveries, we’ve seen a pretty sharp snap back in housing. Of course, the reason it hasn’t come back in this recovery is that this recession was essentially caused by building too many houses. We still have a huge overhang of houses that haven’t been sold that are vacant. And it’s going to take us a while before we want the houses we have, much less need to build more.”
The new money could be used by the banks to invest in emerging markets, commodity-based economies, commodities themselves, and non-local opportunities rather than to lend to local businesses that are having difficulty getting loans.
Increase income and wealth inequality
In 2012, the Bank of England issued a report stating that its quantitative easing policies had benefited mainly the wealthy. For example, the report said that the QE program had boosted the value of stocks and bonds by 26%, or about $970 billion. About 40% of those gains went to the richest 5% of British households.
Dhaval Joshi wrote that “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it”.
Anthony Randazzo of the Reason Foundation wrote that QE “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”.