Under QE, $84 billion a month is pumped into asset markets and prices rise, as we have seen on the stock market. Owners of stocks, who tend to be among the richest Americans, become wealthier and spend a little of it on baubles or boats. The balance they reinvest in a rising stock market to make more money.
When the Fed talks of slowing (tapering) its buying spree, negative anticipations grow. Hence, the “sky is falling” scenario.
The nation cannot undo what has been done. We, however, could do what so many oppose. We could spend money on national needs instead of shifting funds to already-wealthy asset owners.
What are America’s and Indiana’s needs? You, I and our neighbors have lists. Pre-school education? Safer roads and bridges? Environmental protection and restoration? Worker training?
Now, as for the last five years, is the time for aggressive fiscal policy, spending money that becomes jobs and paychecks in ways that benefit our future.
In the early stages of the recession, monetary policy saved the banks and financial asset holders from ruin. That was good. But once that was accomplished, we depended on those institutions to move the economy along. They did not. QE paved the way for a few to be enriched while the nation’s needs went unmet.
Mr. Marcus is an independent economist, writer and speaker. Contact him at email@example.com.