NCPA - National Center for Policy Analysis

Federal Reserve's Quantitative Easing Results Are Mixed, At Best

September 18, 2012

The Federal Reserve has launched a third round of quantitative easing (QE) to help the ailing economy. Ben Bernanke, the chief of the Federal Reserve, defends the QE program, claiming it has boosted gross domestic product by 3 percent and led to 2 million jobs in the past. But the $3 trillion accumulated over the quantitative easing programs has done little to stimulate the private sector, says Investor's Business Daily.

  • Oil prices are still hovering at $95 a barrel.
  • Food prices are at record highs.
  • Furthermore, the median household income fell 1.5 percent to $50,054 and is down 8.1 percent from 2007.
  • Additionally, 46.2 million Americans live in poverty, or 15 percent of the population.
  • Adding more money into the economy isn't the solution, as banks have $1.5 trillion in reserves and companies have $2 trillion stowed away.

The reason the Fed pursues quantitative easing is because the trillion dollar deficit makes it difficult to find buyers for bonds to finance the debt. The private sector is not enticed because the interest rates are too low, thus requiring the fed to buy government debt. This, in turn, distorts interest rates and market decisions.

Under this new round of quantitative easing, known as QE3, the Fed will spend $40 billion a month to buy mortgages. Printing money is not the answer to the nation's economic woes; finding a solution to the fiscal cliff that America is about to go over should be the primary concern.

Source: "Fed's Quantitative Easing Results Are Mixed, At Best," Investor's Business Daily, September 13, 2012.


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