QE Is "At Best An Unfair And At Worst An Evil Policy"

Tyler Durden's picture

Five years ago, when QE first started, we blasted the Fed's "Plan Z" systemic rescue "policy" - which was merely a tried and true dilutive fallback plan used by every collapsing monetary regime starting with the Romans - stating it does absolutely nothing to resolve the biggest underlying threat to the economy and the western way of life, namely the epic accumulation of debt (most of it bad), courtesy of a Fed which has now unleashed a perpetual "buyer of only resort" QE (as we predicted months before QEternity was revealed), which instead only redistributes wealth from the middle class to the wealthiest 0.01%, while providing scraps to the poorest to keep them occupied and away from very violent thoughts.

We were quickly branded as conspiracy theorists, with the confused legacy media promptly resorting to ad hominem attacks: after all, that is what it really knows how to do when all else fails.

Five years, and 20 million Americans on foodstamps later, such conspiratorial thinking has permeated such bastions of the status quo as Citigroup, whose Matt King in a recent expose about the biggest debt bubble ever, showed that not only does record-er debt not fix a record debt problem, but that the "slate has not been wiped clean." At least not yet: it will eventually, in a monetary supernova that has been only delayed, following which the Fed will, finally, be forever out of the picture. A welcome development.

So it is with great amusement that we watch how one after another vehicles of legacy, conventional thought turn, and confirm that Zero Hedge was hardly conspiratorial with our assessment back in 2009. We were just about 5 years ahead of the curve.

Enter the FT, which in an Op-Ed today titled "QE has stigmatised the well-off" says that "despite it being entirely justified as a save-the-world policy in its first round, it is still at best an unfair and at worst an evil policy. Why? Because of the way in which it redistributes wealth. Very low interest rates and the ongoing purchase of government bonds were supposed to lead to a huge investment boom as people put money into capital projects and new business that would yield a better return than they could get on cash or sovereign bonds."

Some more amusing, if very overdue revelations:

I went to a debate at Edinburgh’s Heriot Watt University this week. It asked whether quantitative easing had been a mistake or not. A few of my favourite people were speaking – Scotland’s investment trust guru Robin Angus, The Scotsman’s one-time executive editor Bill Jamieson, bear market expert Russell Napier and a new entry to my list, Heriot Watt academic David Cobham.


Most debates on QE are crushingly boring. This wasn’t, largely because once you had dissected the arguments there was very little disagreement. There was argument about how long it should have gone on for and minor fisticuffs about when the inflation it has made inevitable will turn up.



So while QE might have stopped a whopping fall in nominal GDP (Cobham puts it at somewhere between 5 and 12 per cent) it has also pushed down the purchasing power of the general population and devastated their savings.


That, says Robin Angus, along with the fact that after the first dose we don’t have the faintest idea whether it works or not, makes QE a policy that “combines the integrity of the Bullingdon Club with the probity of an asylum for the insane”. Not everyone feels so strongly about QE. But you can’t deny that if the point of government is to have a go at creating conditions that will allow everyone to get better off, it isn’t going very well. This isn’t just as a result of QE. It’s also about the way in which we incentivise investment across the economy.* It is about the ongoing attempts to shore up the housing market – after all, nothing pushes up the cost of housing like a rise in the price of houses. And of course it is about the fact that wealth was held pretty unequally even before QE began.



[I]ntensely activist monetary policy of the type we have seen since the great financial crisis clearly comes with enormous and unwelcome side effects.

Clearly? If it is so "clear" then why in year five of QE... oh forget it.

But here’s the thing. Modern governments like to have a go at fixing their mistakes. If they create a bad policy they are generally more likely to create more bad policies to fix the problems created by the first bad policy (witness the UK housing market) than dump the first bad policy. So it is with wealth distribution. Having come up with a macroeconomic policy that will stun historians with its scale and innovation – and not necessarily in a good way – they now feel they have to attempt to come up with micro policies to dampen the social effects of the way it has distributed wealth. The rich have gained from QE, so they must lose elsewhere.

Only they never do. Because the second a threat emerges that may "impair" the rich, what happens? Why more screams of mutual assured destruction, taxpayer funded bailouts, kicking the can with even more of the same failed policies now entering their fifth year of wealth transfer - because this time it will be different - and so on.

And now we lean back and await for even more of the incisive mainstream media to suddenly come up with this timely, non-conspiratorial observation.

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hedgeless_horseman's picture



The Inflation Tax has always been a favorite of the wealthy, as it is not a progressive tax, but a flat tax.

The “tax” is paid when prices rise as the result of a depreciating dollar. Savers and those living on fixed or low incomes are hardest hit as the cost of living rises. Low- and middle-incomes families suffer the most as they struggle to make ends meet while wealth is literally transferred from the middle class to the wealthy. Government officials stick to their claim that no significant inflation exists, even as certain necessary costs are skyrocketing and incomes are stagnating.


The transfer of wealth comes as savers and fixed-income families lose purchasing power, large banks benefit, and corporations receive plush contracts from the government — as is the case with military contractors. These companies use the newly printed money before it circulates, while the middle class is forced to accept it at face value later on. This becomes a huge hidden tax on the middle class, many of whom never object to government spending in hopes that the political promises will be fulfilled and they will receive some of the goodies. But surprise — it doesn't happen. The result instead is higher prices for prescription drugs, energy, and other necessities. The freebies never come.


The moral of the story is that spending is always a tax. The inflation tax, though hidden, only makes things worse. Taxing, borrowing, and inflating to satisfy wealth transfers from the middle class to the rich in an effort to pay for profligate government spending, can never make a nation wealthier. But it certainly can make it poorer.



freewolf7's picture

FT: We just wanted to be on the record for saying it's unfair.

Cop: You've been raped.

Citizen: Yes, five years ago.

DoChenRollingBearing's picture

We make a lot more margin on our bearing sales than the paying interest rate at which we could borrow money.  Maybe we should go BIG TIME into debt?



That of course would be in Peru, a better destination for our capital than the USA?

And bearings, of course, are hard assets...

Ying-Yang's picture

I would like the opportunity to borrow 10 billion at 1/2% so I could purchase 10 year T-Bills paying 2.69% and make the spread.

DoChenRB... we could become a bank and make out like bandits?

CBs... picking winners and losers.

DoChenRollingBearing's picture

Our company in Peru owes me money.  They pay me at an interest rate of 5%.  They pay me impeccably.  Where else am I going to get 5% on my money?

Maybe I should just wire them MOAR!  And of course, that is money "down there", not up here, waiting to get bailed-in...

And 5% is a fairly cheap interest rate for THEM, win-win!

bonderøven-farm ass's picture

Perhaps a touch off-topic....but can some please explain what these Floating Rate Notes are?  

ATM's picture

Yes they are debt instruments that the government is trying to entice you to buy with the expectation that as things go south and rates rise that you will be paid moar. However since government controls the measuring stickof rising rates you will be fucked.

knukles's picture

All things considered:

Hooray!  We're Saved All Over Again for the Third Time, partII


By God's nails, these people are impossible.

kralizec's picture

Yeah, they're impossible.  There is no best, just evil.

marathonman's picture

Citizen:  We were abducted and forced into [sex] tax slavery by the government for the last five years.

Cop:  My boss says you better get back to work.

qussl3's picture

Theorectically yes.


But functionally it's regressive, as your snippet describes.


The rich have the excess income/wealth that can be sequestered into inflation protected assets like equities/housing etc...


Thus, as a proportion of income, the poor lose more purchasing power to inflation than do the rich.

socalbeach's picture

The 3 kinds of taxes are progressive (higher income -> higher rate), flat (higher income -> same rate), and regressive (higher income -> lower rate).

I would say QE is a regressive tax because the inflation tax enriches the wealthy since the net tax they pay is negative. First they can borrow at near zero %, or even at a negative real interest rate, to invest in income producing assets. Then they eventually pay off the loan in depreciated dollars. The amount they make from those investments is greater than the added expense they pay due to higher prices.

Maybe we need another term that goes beyond regressive tax to mean higher income -> negative rate.

slightlyskeptical's picture

If we had good paying jobs for the majority of Americans there would be sufficient tax revenue to finance our government and the entitlement programs (SS and Medicare).

The Fed should have bailed out the banks by bailing out the consumers.

1835jackson's picture

I am less than 35 years old. Give me the slap in the face now. I want a future. But of course you will give me the punch bowl instead. 

SWCroaker's picture

Punch is reserved for your elders; you get a broom for clean up, and the bill.    Sorry.    Just sayin'

fockewulf190's picture

Your punch has been spiked with fiscal methinol.

1835jackson's picture

I totally agree. I had better long the prozac market. Thanks Federal Reserve. 

Shell Game's picture

Is heroin addiction unfair or is it evil?

Tinky's picture

Heroin? One fix is too many; a million aren't enough.

syntaxterror's picture

Under the Taliban, there was ZERO heroin production. 'Murika needs her heroin.

AlamoJack's picture

ADDICTED??  I'm not addicted, I can quit any time I want to.  I just don't want to. -THE BERNACK

knukles's picture

Depends upon your perspective on theism vs deism (regarding the morality aspect) and degree of redistribution you believe appropriate (as to fairness)

Shell Game's picture

The addiction I've seen has been nothing short of evil in its destructiveness to the family.  The central bankers have been pushing the same evil.

Bay of Pigs's picture

What happened to all the Green Shoots?

Tinky's picture

Unfortunately the MSM is color-blind, and they were actually brown.

DoChenRollingBearing's picture

@ Bay

You already know that we both prefer Gold Shoots.

AlamoJack's picture

WHADDAYA' MEAN no green shoots?  Green is shooting everywhere!  All over the place man.  Just wait till NOBODY wants to spend a nickel.  When the "green shooting" dries up, that's when THINGS GET REALLY REALLY CHEAP.  Can you spell                    D-E-F-L-A-T-I-O-N?

knukles's picture

And that's what the central banks of the world be most frightened of.... regardless of your or my views or beliefs...
They see that as the biggest economic social risk.
Otherwise there's be no QEs being launched into the maws of the Liquidity Trap fosterd by Credibility Traps.

Go figure

RaceToTheBottom's picture

"What happened to all the Green Shoots?"

They are growing quite nicely, in the wallets of the wealthy...

nope-1004's picture



The lie: "The Fed has multiple tools at its disposal ready to employ to save our economy."

The truth:  "The Fed will continue its highly accomodative policy buying Treasuries and MBS every month."

There are multiple tools ready to use, yet 5 years into this mess, only 1 continues to be used.  That's because the truth is that there is only one "tool".  A banker only knows one corrective action to a financial crisis - plug the damn with printed money.  Even a scholar of past recession reverts to employing the only action they truly have at their disposal.  Perhaps after this crisis the scholars of central banking will be able to add Libor manipulation, precious metals manipulation, and ESF interventionist manipulation to that long list of tools ready to deploy.

The biggest lie we are living is that this is a "free" market.  LMAO!!!!



bagehot99's picture

Hey, I had an idea.

What if the Fed let the markets decide everything? No intervention, no tinkering, no cheap money for their members (I mean 'those they regulate', sorry!). Just allow the bond market to function unassisted. Let the chips fall. 

Fucking nuts, I understand. Everybody knows that central planners have got this thing under control.

Shizzmoney's picture

They will NEVER stop printing.

Because they CAN'T

Groundhog Day's picture

until all frn's are worthless

orangedrinkandchips's picture



We are now in the MOTHER OF ALL SQUEEZES......


(record margin debt generally means shorts)

ebworthen's picture

Like the bailouts of banks, insurers, and corporations QE is EVIL.

Wasting taxpayer debt debases the labor, and thus lives, of every taxpayer.

It makes a mockery of all who honor their commitments and attempt to save for the future.

It reinforces and encourages:  the lust for mammon, theft, graft, corruption, dishonesty, lying, equivocation, and moral relativism.


TBT or not TBT's picture

QE disproportionately helps those with first access to money. Have good credit and means to invest and good income? Your potential for enrichment is always greater than lesser prepared less connected people, but QE amplifies it. You can play with the new money.

orangedrinkandchips's picture

Either the history and ecomonic text books are wrong or this time is different.......




knukles's picture

I'm just starting a book titled "The Triumph of American Capitalism" published in 1940.  The title is dramatically misleading....
It deals with the America's (Colonial to 1900) "escape" from the yoke of British Mercantilism and how much better off the colonies then the states were when it was a freer market, less government interference and crony capitalism....  simply because neither the states nor the federalies had/exercised that much power.
What is most interesting are the recitations of the progress (Same or different this time) to and from hard specie and fiat.  And it happened a whole bunch of times.  Centralized debts, currency, state issuance, local, private banks, etc... opposite the stability of gold and silver.
Fascinating perspective and details not available in modern texts.  (Everythings been propagandized, sanitized, details and intricacies of the past, simply, lost!)
No, it's not different.
Excessive monetary expansion has been tried in every way shape and form right here in river city, folks.
And it never ever worked.
To say this is unprecedented in the US is false and to point siply to the Wiemar experience is narrow minded and illusory.
"American exceptional-ism" has already been thorough this shit before.
We simply ignore our own past ......

Hang Em High's picture

"Have faith in Mammon,

and trust to the quibling of lawyers.

Rely on the cowardice of politicans.".......................Lewis Lapham

kchrisc's picture

It is not a policy, it is theft.


Is it time for the guillotines yet?!

Dr. Engali's picture

"But here’s the thing. Modern governments like to have a go at fixing their mistakes. If they create a bad policy they are generally more likely to create more bad policies to fix the problems created by the first bad policy"

To grasp the issues we have one must first understand that there are no "mistakes" in government policy. Policies are put in place knowing full well that they benefit the insiders first, and that one of two things will happen when shit falls apart. The problems will either be passed in to another body politic, or government will find the appropriate people to demonize as they go about "finding a solution" to the problem. Wash rinse repeat.

slightlyskeptical's picture

QE could have worked if the Fed had bought the debt and refinanced it with the consumers at break even levels. Would have given major relief to millions of Americans and still saved the financial system at the same time.  Of course Zero Hedgers hated this idea even more than what has actually transpired.


sschu's picture

bought the debt

This of course is the fly in the ointment, this debt is unpayable, it has no ultimate real value for there is no ability (or intent) to repay.  So to say that the Fed could have bought the debt and pawned it off on another is just more of the same, a ponzi scam.

What the real issue is about IMHO, is that America (and the western world) cannot deal with the fact that we can have it all.  Living within your means is a challenge that most/many prosperous societies have not be able to tame.  It is just too easy to for politicians to buy votes and or for the people to borrow to get that nice car or vaca.

History tells us where this leads.  As Solomon said, “nothing new under the sun”.  


RaceToTheBottom's picture

No doubt the government response will be, when gold finally cannot be manipulated down any more, to slap a special tax on any gains from investing in Gold

withglee's picture

From this blog:

The Money If we are to understand the crisis, first we must understand money - a topic which the masses have deliberately been kept ignorant about.

Readers of this blog will not understand money after reading it. If they understand what they read, they will get a completely wrong description of what money is. They will get the traditional "capitalist" Mises monk type explanation. And money problems like we have today will perpetuate.

Money is "a promise to complete a trade". This is obvious from examining trade. Trade happens in three steps: (1) Negotiation; (2) Promise to trade; (3) Delivery. Simple barter does steps (2) and (3) on the spot simultaneously. Money allows steps (2) and (3) to happen over time and space.

Knowing this, it's easy to see that money is "a promise to complete a trade". It is created by traders after a negotiation step and it is destroyed by traders after the delivery step. In between, the "certificates" that guarantee the trades circulate and become objects of direct barter. They have universal and unchanging value over all time and space. This comes from proper management.

Proper management of any Medium of Exchange (MOE) observes the relation: INFLATION = DEFAULT - INTEREST.

The MOE manager freely certifies all requested trading promises and destroys those certificates on delivery. The MOE manager monitors for DEFAULTS (a rollover is a default) and collects an equal amount of INTEREST assuring that INFLATION is zero at all times everywhere.

It is traders that create money and by definition, a trade is a perfect balance between the trading partners. Thus, supply and demand of properly managed money are always in perfect balance.

The manager of the MOE has no interest in prices. He has no interest in the supply or demand for money (i.e. no interest in trading activity). He has no interest in employment levels. He has no interest in the temperature of the economy. He has no interest in the velocity of money. He has no interest in capital. He has no interest in scarce shinny metals.

His job is just about as simple and trivial as it gets. And if we ever find someone to properly manage a MOE, he will drive out all other MOEs as this proper management is as good as can be done. It is "perfect". When than happens, the world will be a truly enjoyable place to live.

Todd Marshall
Plantersville, TX

Radical Marijuana's picture

My reply,


Money is measurement backed by murder.

Measurement is done by relative SUBTRACTION of some part from the Whole. That subtraction is always relatively some illusion, or a lie, since the part is never truly subtracted from the Whole. Private property is never more than somebody staking a claim, and then backing that claim up with violence. Private property, which can then be "exchanged," does not exist outside of some system of public violence,

As soon as one subtracts any living thing from its Whole Environment, then one has defined its boundaries across which is must obtain flows of energy and material, in order to continue living, since that living is a process like fire, which needs its fuels. That process of operating as an entropic pump across the boundaries of any definite living being is TAKING, which in basic English language is ROBBERY.

That is the correct context in which to place the theory of "money" as a Means Of Exchange (MOE).

What actually happens, since human realities are ALWAYS organized lies, operating organized robberies, are that government IS organized crime, controlled by the best organized gang of criminals, which currently happens to be the international banksters, that made and maintain the Federal Reserve Board, through the application of the methods of organized crime, such as bribery and intimidation, and the assassination of successful politicians that could not be bribed or intimidated.

The basic Medium Of Exchange theory of money is silly, superficial social bullshit, promoted by the biggest bullies, in order to advance their interests. Money is the symbolic accounting of the flow of energy and material. However, the ways that energy systems actually operate mean that the most labile component controls the system. Therefore, our civilization has ended up being controlled by the people who are the best at being dishonest, and backing that up with violence. Neolithic Civilization flowered in the form of the American Democratic Republic, but then its fruit went rotten, and perhaps turns into seeds of the next generation of possible systems?

See my comment below, for more of that same sorts of opinions, where I quoted from Louis T. McFadden, a Republican representative from Pennsylvania who, as a former bank cashier and president, knew the financial system intimately.”

Rep McFadden said:

"When the Federal Reserve Act was passed, the people of these United States did not perceive that a world banking system was being set up here. A super-state controlled by international bankers and industrialists ... acting together to enslave the world ... Every effort has been made by the Fed to conceal its powers but the truth is -- the Fed has usurped the government."

McFadden probably paid with his life for his outspokenness. After he lost his congressional seat in 1934, he remained in the public eye as a vigorous opponent of the financial system; that is, until his sudden death on October 3, 1936, of a “dose” of “intestinal flu” after attending a banquet in New York City.” There were two previous attempts on Louis McFadden’s life. Two bullets were fired at him on one occasion and later he was poisoned at a banquet. “Evidently the third time the assassins succeeded, and the most articulate critic of the Federal Reserve and the financiers’ control of the nation was dead. He was 60 years old.”

Were international bankers responsible for the assassination of Louis T. McFadden? IS LIKE ASKING "DOES A BEAR SHIT IN THE WOODS?"

That is the real social context in which one should regard the shallow understanding of idealized "money" as being a Medium Of Exchange. The true medium of exchange is ENERGY, and both political economy and human ecology ought to be understood as energy systems, in order to have money as measurement backed by murder, operate better. HOWEVER, the perpetual problem with that is the energy systems themselves go through their own path of least action, or path of least resistance, which in human terms is the path of least morality, which manifested through the history of warfare, and militarism, to created War Kings, which morphed to become sovereign states whose powers to tax, and to kill to back up their power to tax, were covertly taken over by the Fraud Kings, the international bankers.

Indeed, "the Fed has usurped the government" because government IS organized crime, controlled by the best organized gang of criminals, which happens to now be the international bankers. The only genuine solutions would be overall better organized combined debt/death controls, because the realities ARE those systems, whereby bribery, intimidation and assassination, actually directed the political processes. Any alleged "solutions" based on stopping death controls from existing are totally bullshit impossible ideals, which are guaranteed to backfire badly. Since the controlled opposition continues to promote that kind of bullshit about governments becoming more open and honest, one can more reasonably expect that the runaway triumphs of already dominant systems of deceits and frauds will cause debt insanities to be driven to become death insanities. ONLY a government which was paradoxically open and honest about the death control systems, that back up the debt control systems, could ACTUALLY become more transparent and just.

ONLY more competent citizens, that understood that they were members of an organized crime gang, could manage to democratize the combined money/murder systems. Otherwise, we must continue to have the runaway triumph of the established systems of social deceits and frauds destroy themselves through their paradoxical madness, due to too much "success" at controlling civilization with HUGE LIES. So far, the only significant public "opposition" is done by various Black Sheep, reactionary revolutionaries, whose opinions about "good government" are all BULLSHIT.

Of course, from marijuana to money, and everywhere between, the controlled "opposition" recognized by the mass media (and supported by significant numbers of the Zombie Sheeple) are the same old kinds of Black Sheep, promoting the same old kinds of false fundamental dichotomies, and related impossible ideals. Of course, more radical truth, whether about radical marijuana, or radical money, is practically a non-starter in the current political climate.

One could continue to say that the Zombie Sheeple get the kind of bad government that they deserve, since they still pay most attention to the Black Sheep's bullshit "solutions" about what to do about their problems. As always, it is difficult to overstate the degree to which EVERYTHING IS BACKWARDS, from the most profound philosophy of science issues, throughout every other political issue.

As always, the paradoxical ways that historical mechanisms have selected for those who were the best at being dishonest, and backing that up with violence, to end up controlling civilizations, have resulted in the world being controlled by the maximum possible deceits and frauds. The deepest of those deceits continues to be the degree to which those who deny the existence and necessity of death control systems have the most social stature and prestige. The paradox is that the more successful the establishment and their controlled opposition become at denying and lying about the actually crucial, central role of the death controls, then the worse the overall social situation devolves to become. Therefore, again, in that light, the Zombie Sheeple incompetent citizens appear to get the bad government that they deserve, since they continue to allow themselves to be tricked by both the Vicious Wolf established liars, as well as the bullshit alternative Black Sheep "leaders!"

Meanwhile, the Domesticated Dogs, the militarized police, are being brainwashed within that context to prepare for insane death controls, in the form of eruptions of democidal martial law, which will happen because no other better death controls were possible instead, since the triumph of actual death controls, such as assassinations of politicians, were able to be successfully carried out, without the Zombie Sheeple understanding that. Therefore, decade after decade, Century after Century, for millennia, Neolithic Civilizations have been building themselves up and up, as enormous systems of lies backed by violence, driving onward the paradox that the violence can never make those lies become true, but only make that society as a whole become more psychotic ...

Central to the systems of social control that constructed that kind of civilization were death controls, done through the maximum possible deceits, and crucial to that were the ways that the controlled opposition promotes the same sets of false fundamental dichotomies' impossible ideals about what death controls should be, and moreover, that conscious death control systems should not exist at all. Therefore, the first level of radical truth is more truth about the existing and previously existing death controls, and the next level of radical truth is about WHY that actually happened, so that the third level of radical truth would be operating better death controls in the future.