The View | The Federal Reserve’s quantitative easing report card is mixed – except for the rich
Stephen Roach says as the 10th anniversary of the Federal Reserve’s quantitative easing programme approaches, five lessons can be learned from its successes and shortcomings
The most important lesson pertains to traction – the link between Fed policy and its congressionally mandated objectives of maximum employment and price stability. On this count, the verdict on QE is mixed: the first tranche (QE1) was very successful in arresting a wrenching financial crisis in 2009, but the subsequent rounds (QE2 and QE3) were far less effective. The Fed mistakenly believed that what worked during the crisis would work equally well afterwards.
An unprecedentedly weak economic recovery says otherwise; the QE payback was disappointing. From September 2008 to November 2014, successive QE programmes added US$3.6 trillion to the Fed’s balance sheet, nearly 25 per cent more than the US$2.9 trillion expansion of nominal GDP over the same period.
