Quantitative Easing

I'm a little slow sometimes in catching up to what is going on in the economy.  The fact is, I don't pay that much attention to the news and most news coverage is of all the wrong things anyway.  The things that truly impact us tend to stay below the radar of most of the media.

Tonight a friend asked me what I thought about the Quantitative Easing Policy of the Fed.  It was a new term to me, so, I did some research.  At risk of being raked over the coals for doing so, I am going to link (here) to the Wikipedia definition.  Yeah, I know, there is definitely risk associated with using a Wikipedia definition, but, after a good deal of research of other sources I concluded that it does a pretty good job of explaining it.

I also am linking an MIT article that is another attempt at explaining it.  Interestingly, the conclusions of the two definitions are somewhat at odds.  The MIT article seems to think it will do no harm, the writer of the Wikipedia entry sees a good deal of risk.

I not only see risk, I see definite harm to the average citizen.  The impact of the policy is an increase of the money supply while forcing interest rates to artificially low levels.  The result is a deflated dollar.  That means that the average citizen is losing wealth because his money is worth less and he can't get a reasonable return on most investments that he would make.

The problems with the economy are not going to be fixed by Monetary Policy.  The real issue is uncertainty created by wrong-headed Fiscal Policy.  Until Congress and the current Administration get their house in order, the economy will remain stagnate.  While there is plenty of money in the system, no one is willing to risk it to create new jobs.  Banks aren't lending without Federal Guarantees and businesses aren't expanding in the face of huge tax increases on the horizon.