If you look at the stock market, you might believe that the monetary policies of the federal reserve have been good for you and the economy. In reality what they’re doing is decreasing the value of the dollar, thereby increasing inflation and the cost of imports, while discouraging saving. Andy LaPerriere explained what they’re doing in a Wall Street Journal op-ed.
But QE and ZIRP also reduce long-term economic growth by punishing savers, reducing saving and investment over the long run. They encourage the misallocation of resources that at a minimum is preventing the natural rebalancing of our economy and could sow the seeds of another painful boom-bust.
One intended effect of a loose monetary policy is a weaker dollar, which can help gross domestic product by boosting exports. But a weaker dollar also raises import prices (such as oil prices) for American consumers. For the average American family, this adverse impact has likely outweighed any positive impact from QE and ZIRP.
The cost of a weaker dollar for most people is not offset by temporarily higher stock prices for two reasons. First, most Americans don’t own much stock. Second, stock prices are not going to be higher 10 years from now because of the Fed’s policies, so the effect is to bring forward equity returns, not increase long-term returns.
Read the whole thing. In short what the Fed is doing is masking the serious problems with the US economy.