| First, it's not at all clear that QE benefits the rich. The Fed insists that QE lowers interest rates, but the evidence of that is mixed. Here is a study:
https://www.frbsf.org/economic-research/files/KrishnamurthyV... Basically they argue that in some fixed income markets, QE can lower rates because of "technical" reasons -- e.g. there is a captive market for the bonds. But not corporate bonds. Moreover, QE results in a beautiful policy schizophrenia, where the same person can simultaneously believe all of the following: * Raising interest rates benefits the rich who are coupon clippers and want hard money * Lowering rates is good as it euthanizes the rentier and reduces immoral interest * Lowering rates is bad as it hurts the poor with high house prices and helps the rich get richer from asset bubbles. * Lowering rates is good because it causes inflation that helps debtors rather than creditors * raising interest rates is good for the banks because they earn more interest on deposits * lowering interest rates is bad for the banks because they are not able to earn much on the assets they purchase Beyond the effect of interest rates, does QE do anything? I don't think so. QE does not increase money in circulation. Money in circulation goes up when the policy rate is zero because there is little incentive to keep your money in a savings account when those pay basically nothing. This indifference on the part of households is not economic stimulus. People don't run out and start spending money as a result of QE. But there may be another channel -- perhaps it freaks people out enough that they change their spending behavior as a result of being bothered by QE. Thus being aware that almost no one understands what QE does may be the key to knowing how it works. It's dadaist monetary policy, where the public is thrown into fear and confusion. The key, then, is to control the confusion. * If you want people to spend a lot of money on consumption, then play up how QE is "money printing" that will cause massive inflation. * If you want people to spend money on investment, then promise asset bubbles and capital gains. * If you want QE to discourage investment, then play up how the long durations make investments highly sensitive to very distant returns and so probably everything is mispriced and too volatile. Stay away from the asset markets! Whatever you need, QE is the answer. |