In-depth analysis on Credit Writedowns Pro.

The Federal Reserve cannot create permanent wealth through quantitative easing

A reader asked me to comment on a video from the Big Picture conference of Jim Bianco commenting on the so-called wealth effect of quantitative easing. In the video, Jim takes the position that the Fed cannot create permanent wealth though QE. It can only create (temporary) “loss reduction”.  Jim noted that we have had record stock mutual fund outflows in the United States, and that this had not changed even after the Fed began QE3. And he believes this is emblematic of the Fed’s inability to create permanent wealth through quantitative easing and that QE is going to produce the worst possible outcome for the Fed, producing – in the best of cases – a (temporary) wealth pickup for the wealthy and nothing for the rest. I agree wholeheartedly.

Let’s look at why QE won’t lead to permanent wealth creation.

[Content protected for Gold members only]


Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.