Quote:
Originally Posted by LovingKayla
You can always tell when you post something the other side can't argue with (both sides.)
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Kayla, virtually no conservative or libertarian-leaning individuals are in favor of large quantities of QE -- but even most on the left express clear reservations, if not outright opposition.
About the only well-known zealous proponent of massive QE is Paul Krugman, and almost no one in the financial world takes him seriously. Famous economist Joseph Stiglitz is about as far to the left as you can get without actually being named Paul Krugman, but he has been voicing opinions in opposition to QE for two or three years now.
One of the key reasons for this is that large doses of QE clearly increase income and wealth disparity, and the transmission method by which this happens is fairly obvious and easy to understand.
It's been said that one of the putative reasons for additional QE is that it may give a psychological "boost" to the economy. However, that may backfire, since statements that the Fed intends to continue ZIRP and QE virtually forever suggest that policymakers are in full-on panic mode.
Another thing that I think needs to be pointed out is that even when the Fed is not overtly doing QE, the financial sector is engaging in what we call "financial repression."
Here's an interesting short article from last year:
http://www.economist.com/node/188342...ry_id=18834259
Since the Fed has guaranteed near-zero short rates (ZIRP) for at least three more years, the banking system can borrow at near zero percent in REPO and other overnight markets and use the proceeds to buy large quantities of such things as 10-year treasury notes. Since the U.S. government stands behind those assets, the only risk assumed by the banks is interest rate risk, and the too-big-to-fail banks all know they'll be backstopped by Treasury and the Fed if anything goes awry. This is called the "carry trade." People who think Dodd-Frank fixed much of anything are living in a fantasy world.
All of this helps profligate big spenders in congress finance our budget deficits, and gives banks the chance to fatten up bonus pools for top traders and executives to unprecedented proportions. That's a big reason why so many people in the financial services industry pocket 8-figure annual incomes while producing nothing of value to anyone else. Needless to say, they can afford the most expensive lobbyists known to man.
Many political decision makers, as well as those who finance their campaigns, benefit enormously from this type of crony capitalism, so don't expect anything to change any time soon.
(Note: Most of the above was excerpted from draft copies of stuff I wrote just within the last ten days.)
how quantitive easing helps the rich and soaks the rest of us
