Is Quantitative Easing Permanent?
by John Lawrence, April 12, 2019
With its QE policy the US central bank prints money and effectively gives it to the rich. The policy has prevented a recession because there is just more money floating around. Rich investors fuel start-ups, people get employed and the 401(k) owning middle class is happy to see their stock portfolios increase in value. Most of this money causes asset inflation meaning stocks and real estate. However, people in the lower middle class can't find a home to buy that they can afford, and the non-stock owning public is left out of this prosperous expansion of the economy. Rents are soaring and homelessness is on the increase.
The US dollar is not backed by gold or anything else so it is what is called fiat money. It's worth something because the government says it is. Flooding the economy with fiat money hasn't caused wage or price inflation like it was feared, but it has priced people out of homes. If one was smart enough to have invested in a home or the stock market many years ago, they are sitting pretty now. For the lower middle class, who don't own stocks or other financial instruments and are renters instead of owners of real estate, they are on the wrong side of the wealth and income divide. They are on the downside of economic inequality.
Another benefit of central bank money printing and giving it to the rich is that the government will always have buyers for US Treasury bonds so that it can run trillion dollar deficits ad infinitum. If the market for US Treasuries dries up, the US government is in a pickle. It has been sustained by the fact that the dollar is the world's reserve currency. Assets all over the world are priced in dollars. That has allowed the US to apply sanctions to governments and individuals who hold their wealth in dollar denominated assets. However, many countries in the world are changing their portfolios and banking arrangements so that the US doesn't have this hold over them. This means that the dollar will eventually lose value with respect to other currencies.
The Green New Deal would turn the current US economic model upside down. Instead of fiat money being injected at the top, it would be injected at the bottom benefiting primarily the poor and not benefiting the rich. It could be paid for partly by taxing the rich and partly by fiat money or money that has been printed in order to create good paying jobs as Abraham Lincoln did when he created the fiat Greenbacks to fund the Civil War. The Green New Deal plus Medicare for All will effectively take control of the economy away from the rich and give it to the poor. It could also cause wage and price inflation, but the asset inflation that we have now will attenuate. That means that the stock market and real estate prices will level off. People might again be able to afford to buy a house, and rents will become more reasonable.
