In past posts I have complained about Quantitative Easing being a stealth bank bailout. Now the cat is out of the bag, as the man responsible for orchestrating QE confesses it is “the greatest backdoor Wall Street bailout of all time”.
In this brutal Wall Street Journal op ed, he confesses paints a bleak picture of the Quantitative Easing and its effectiveness:
Even by the Fed’s sunniest calculations, aggressive QE over five years has generated only a few percentage points of U.S. growth. By contrast, experts outside the Fed, such as Mohammed El Erian at the Pimco investment firm, suggest that the Fed may have created and spent over $4 trillion for a total return of as little as 0.25% of GDP (i.e., a mere $40 billion bump in U.S. economic output). Both of those estimates indicate that QE isn’t really working.
Yet we continue with the same approach, trying to spur the economy by lowering interest rates, even though rates are near zero. Why has no thought been given to lowering the payroll tax or some other plan to put more money in the pockets of the working poor? Instead we continue to prop up Wall Street institutions by weakening the asset base of the US Treasury.
I doubt the US Treasury will ever be able to reverse the damage done to our balance sheet. I just hope we can avoid the next financial panic until we get over the previous one.