With the artificially low interest rates promoted by the Federal Reserve with Quantitative Easing and Operation Twist, there are winners and losers as well. By the Fed’s own admission, the purpose of the current monetary policy is to significantly reduce long-term rates of interest to stimulate the economy.
The Federal Reserve’s monetary easing is designed to stimulate the economy while at the same time keeping inflation in check.
The fallacy of the policy, however, becomes apparent when one considers who loses financially as a result of monetary easing. Federal Reserve policy papers typically consider the effects on only those who benefit from the policies.
Those who are negatively affected by the Federal Reserve monetary-easing hold the key to the rationale as to why the economy is not responding to the Fed’s historic loose monetary policies.
Two years ago, in November 2010, Dr. Bernanke wrote a paper entitled “Emerging from the Crisis: Where do we stand?” The losing parties to the policies help understand why the paper he delivered was premature.
Who are the losers?