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Fed Official Says Fed's Quantitative Easing Policy Failed to Achieve Any of Its Recovery Objectives
Raymond Richman, 8/18/2015

Jeff Cox of CNBCcom reports that the Federal Reserve is putting some of its post-crisis actions under a magnifying glass and not liking everything it sees. Stephen D. Williamson, vice president of the St. Louis Fed, finds fault with three key policy tenets. Cox writes:

”Specifically, he believes the zero interest rates in place since 2008 that were designed to spark good inflation actually have resulted in just the opposite. And he believes the "forward guidance" the Fed has used to communicate its intentions has instead been a muddle of broken vows that has served only to confuse investors. Finally, he asserts that quantitative easing, or the monthly debt purchases that swelled the central bank's balance sheet past the $4.5 trillion mark, have at best a tenuous link to actual economic improvements.”

“Williamson is quick to acknowledge that then-Chairman Ben Bernanke's Fed, through liquidity programs like the Term Auction Facility that injected cash into banks, "helped to assure that the Fed's Great Depression errors were not repeated."

"There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed—inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation," Williamson wrote.

We all know that wages have not benefitted at all under the Fed’s policies and that the economy’s growth has been less that 2% per year and the growth in GNP for the 2^nd quarter of 2015 is projected to be 1½ percent of less. We appear to be on the verge of another recession