06 November, 2014
The End of QE
Well, it's been six long years of the three programs known as Quantitative Easing, or "QE." The first, under president Bush, was for $750 billion. The second, under president Obama, was for another $800 billion. The third, also under Obama, was an ongoing payment by the U.S. government of $85 billion every month. Now, more than $6.6 trillion later, how much did all that taxpayer-funded expense help the economy?
The overwhelming majority of the money from QE went straight to the banks through purchases of risky mortgages. It is important to note that none of these purchases actually relieved the buyers from their bad mortgages, it only relieved the banks. Since this money is backed by the U.S. government, this means that the banks received money from the taxpayers to the tune of over $20,000 for each person in the US.
During this time, the banks were foreclosing loans, including those that were not rightfully subject to foreclosure, and employing deceptive practices to charge their customers illegal fees. It's true that the government eventually went after these banks, but that doesn't fully help those whose lives were turned upside down by this. The banks also started reporting record profits while the public at large were divided between those whose earnings remained stagnant (in terms of purchasing power), those whose earnings went down, and those who can't find any work, some of whom simply gave up looking at some point.
The economy has supposedly been recovering since 2008, and the Fed seems intent on blaming the public for any continued weakness. You see, if you dare choose to save, or as they said, "hoard," money in times of economic uncertainty, then you are the problem. It may seem amusing that the greatest minds running our national economy don't understand the need to save, but what else can you expect when their entire purpose is to maintain an economy that is fueled by a debt-based currency.
But, can't we trust the Federal Reserve? After all, since Congress has the sole authority to mint and regulate U.S. currency, the Fed answers to the government, right? Since the Fed is responsible for managing U.S. currency on behalf of the government and for the benefit of the U.S. people, U.S. economic interests will be its first priority and it will leave the issue of foreign aid to the elected officials in our government. It wouldn't, for example, use the authority Congress gave it to regulate the U.S. economy and currency to aid a foreign currency or economy without government approval or oversight. Finally, being bankers, the Federal Reserve would keep scrupulous account of all its activities, especially when those activities can have a dramatic impact on the economy.
I am being sarcastic. The Congress has entirely abdicated its Constitutional responsibility to regulate U.S. currency and handed it to the Federal Reserve. The Federal Reserve does not really answer to the U.S. government or the people. We are simply told to trust that those who run the largest banks wouldn't be in those positions unless they knew best how to manage money and the economy. The sad truth is that there is almost nothing we can do when they make even the largest mistakes. We are not alone in this; the people of other countries are finding themselves in the same position. The Irish are wondering why they have to pay to support an already failed bank. Over twenty percent of the English don't earn a living wage and the Germans are facing a weakening economy.
We've been told for years that QE was necessary, that the economy would fail if it didn't continue. Well, now that it's over, it appears that even some bankers disagreed with that. Unfortunately, the people have seen little, if any, benefit from QE because the banks have apparently directed most of the money toward Wall Street investments.
QE was supposed to help the national economy recover, but how can the national economy recover when nothing was done that actually helped the local economies around the country? While the stock market took its bumpy, roller coaster ride in the overall direction of "up," small businesses across the country were failing. Part time employees, finding their hours cut by employers avoiding Obamacare, went looking or additional work - competing with those who were out of work altogether. Local utilities, cities and even counties filed for bankruptcy, and some were beginning to suggest that states should be allowed to file for bankruptcy as well. As Bill Gross put it, "One economy (the financial one) thrives while the other economy (the real one) withers."