...Nowhere
is this phenomenon more pronounced than in the United States, where the
Federal Reserve has reduced interest rates to unprecedented levels and,
through quantitative easing (QE), augmented bank reserves by purchasing
financial assets. But inflation – which rapid money-supply expansion
inevitably fuels – has so far remained subdued, at roughly 2%, because
banks are not using their swelling reserves to expand credit and
increase liquidity. While this is keeping price volatility in check, it
is also hindering employment growth....
...America’s central bankers need not search far to find out why QE is not working; evidence is published regularly for anyone to see. During QE2 (from November 2010 to July 2011), the Fed added a total of $557.9 billion to reserves, and excess reserves grew by $546.5 billion. That means that banks circulated only 2% of QE2’s contribution, leaving the rest idle. Similarly, since QE3 was launched last September, total bank reserves have grown by $244.1 billion, and excess reserves by $239.4 billion – meaning that 99% of the funds remain idle....
Wall Street would say any QE was wildly effective, but, the American work force would disagree. If one considers the principles behind austerity and it's failure to stabilize and grow an economy, the only reasonable path to improve the economy was indulging Wall Street's wildest dreams in order to eke out at least 2% more circulating capital. QE pandered to the fact the banks had the power in 'too big to fail' and the only way that was going to change was to place so much money in their reserves they were willing to waste 2% by chance there would be a return on those monies.
It is even easier to point to that fact in realizing the excessive indulgence with the London Whale. The monies lost by JP Morgan was chump change for the most part. It is that 'standard' of banking strategy that was at least working to return some employment in the USA.
The policy changes that needed to occur to increase US Treasury income to reduce national debt and to reduce taxes to increase circulating capital was very difficult to achieve. The lack of movement of policy changes primarily stalled after 2010 because the GOP's insistence to adhere to their election rhetoric. That rhetoric was set by the Tea Party and the growth of the USA slowed and has remained sluggish due to that party priority.
The sluggish USA economy received hard realities in that the GOP's austerity would even side line the Blue Angels for year while the banks were hoarding their reserves without lending.
At least The Fed managed to manipulate the banks enough to push through some circulating capital.
...America’s central bankers need not search far to find out why QE is not working; evidence is published regularly for anyone to see. During QE2 (from November 2010 to July 2011), the Fed added a total of $557.9 billion to reserves, and excess reserves grew by $546.5 billion. That means that banks circulated only 2% of QE2’s contribution, leaving the rest idle. Similarly, since QE3 was launched last September, total bank reserves have grown by $244.1 billion, and excess reserves by $239.4 billion – meaning that 99% of the funds remain idle....
Wall Street would say any QE was wildly effective, but, the American work force would disagree. If one considers the principles behind austerity and it's failure to stabilize and grow an economy, the only reasonable path to improve the economy was indulging Wall Street's wildest dreams in order to eke out at least 2% more circulating capital. QE pandered to the fact the banks had the power in 'too big to fail' and the only way that was going to change was to place so much money in their reserves they were willing to waste 2% by chance there would be a return on those monies.
It is even easier to point to that fact in realizing the excessive indulgence with the London Whale. The monies lost by JP Morgan was chump change for the most part. It is that 'standard' of banking strategy that was at least working to return some employment in the USA.
The policy changes that needed to occur to increase US Treasury income to reduce national debt and to reduce taxes to increase circulating capital was very difficult to achieve. The lack of movement of policy changes primarily stalled after 2010 because the GOP's insistence to adhere to their election rhetoric. That rhetoric was set by the Tea Party and the growth of the USA slowed and has remained sluggish due to that party priority.
The sluggish USA economy received hard realities in that the GOP's austerity would even side line the Blue Angels for year while the banks were hoarding their reserves without lending.
At least The Fed managed to manipulate the banks enough to push through some circulating capital.
Nowhere
is this phenomenon more pronounced than in the United States, where the
Federal Reserve has reduced interest rates to unprecedented levels and,
through quantitative easing (QE), augmented bank reserves by purchasing
financial assets. But inflation – which rapid money-supply expansion
inevitably fuels – has so far remained subdued, at roughly 2%, because
banks are not using their swelling reserves to expand credit and
increase liquidity. While this is keeping price volatility in check, it
is also hindering employment growth.
Read more at http://www.project-syndicate.org/commentary/why-quantitative-easing-has-failed-to-boost-us-investment-and-jobs-by-allan-h--meltzer#kyiSo06Ih9DfDJkb.99
Read more at http://www.project-syndicate.org/commentary/why-quantitative-easing-has-failed-to-boost-us-investment-and-jobs-by-allan-h--meltzer#kyiSo06Ih9DfDJkb.99
