| While I'm sure that there are some people who are quite happy about what the Fed is doing, that sounds very much like conspiracy theory nuts. From what I understand, the Fed is politically in a very crappy position: they have a mandate for high employment (which is a good thing!), but they cannot really do anything to meet that mandate. To create jobs, somebody needs to actually spend money. Spending money means moving money around so that afterwards, person A has less monetary assets and person B has more monetary assets. However, the Fed is not allowed to engage in such actions. All it can do is asset swaps. So it can swap short term for long term bonds, for example, but when they do that, everybody still has the same amount of monetary assets afterward. It is only the maturity and interest rate structure that changes. The hope is that lower interest rates encourage private investment and thus private spending on jobs. However, that's not very realistically going to happen on a larger scale, because demand for products matters much more to firms than a tiny change in interest rates does. And as long as unemployment is high, demand remains low, which means that firms have no incentive to create jobs. It's a vicious cycle, that in theory the government (the union of legislative and executive branch) should break out of, because they are in a unique position to do so: they are not bound by market constraints. But the government is instead bound by partisan politics and an unscientific belief in the religion of austerity. So with the government not doing anything, the Fed at least tries to do the best they can to help the situation, which happens to be almost nothing - but they still try, because of the miniscule hope that there are, after all, some positive effects. |