The left loves to talk about the top 1 percent and the growing inequality in the United States. We can debate its causes and how serious an issue that is, but that is what the left concerns itself with. Except with an election looming.
A third round of quantitative easing, which was announced on Thursday, is a recipe to boost the stock market (with bond yields so low where else can the investment dollars go?) but not do much of anything for the “little guy,” who could benefit from some decent fiscal policy.
The Wall Street Journal editorial board explains:
So much for fears that the Federal Reserve might disappoint Wall Street. Chairman Ben Bernanke and his music men at the Fed’s Open Market Committee put on their party hats Thursday and unleashed an unlimited program of monetary easing. The move exceeded even Wall Street’s expectations, but whether it will help the real economy in the long term is doubtful.
So we have a situation where the stock market takes off, the investor class gets richer and we have 43 months of more than 8 percent unemployment and a diminution in median household wealth to 1995 levels. Isn’t this the sort of class divide the president rails against?
It is remarkable, really, that Democrats defend the Obama economy by pointing to the rise in the stock market since the president took office. The Dow Jones was at 8,279.63 when Barack Obama took office. It’s now over 13,500, boast the Democrats. Swell, the Wall Street crowd rakes it in and the rest of the country is setting records for unemployment, poverty and food-stamp use. Imagine if the Republicans made such an argument. If a Republican were in office, the left would holler that this is a jobless recovery.
It is also not helping induce banks to make more loans. The reverse is true. As Forbes commented earlier in the week: “Four years in, the [Fed] strategy has definitely lowered the cost of borrowing without sparking inflation or lowering the value of the dollar. (Another concern from critics.) But it obviously didn’t create enough jobs. In fact, companies like banks that used their newfound liquidity for acquisitions often cut jobs, which almost offset actual job creation.” The main result is a stock market bubble, which isn’t doing much for average Americans.
Moreover, the Fed’s action takes heat off the elected branches of government, which should be working on fiscal policy that promotes job growth, not simply stock market profits. The Senate can get by with no budget for another year, and Obama can escape responsibility for a complete failure of leadership on tax and budget policy. With each Fed bailout there is less and less incentive for Congress and the president to do their jobs.
But don’t take my word for it. This CNN report tells us:
[Bill] Gross, who is the co-founder of asset management firm Pimco and the manager of the largest mutual fund in the world, says the Fed’s policies have made borrowing so cheap it may not make sense for banks to lend anymore. . . .
Any further drops in interest rates, which is what Bernanke seems to want, won’t cause banks to lend more. Instead, Gross thinks, banks will lend less, closing up branches and removing the ATMs that are costing them so much money to run.
“For the current shipwreck perhaps we have the Fed and other central banks to blame,” Gross wrote to investors.
In other words, Bernanke’s printing press is good for stock investors, but bad for borrowers, banks and average Americans. (“Bernanke could end up fixing one credit bubble with another.”)
Conservatives see QE3 as pure folly. But Democrats should be outraged. This is monetary policy for the top 1 percent.