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2 Arguments Against Quantitative Easing

Updated on September 19, 2012

Below are two of the most popular arguments that people are currently giving against Federal Reserve Policy of quantitative easing, which has kept interest rates low and inflated the prices of stocks and bonds.

1) Quantitative easing mainly benefits the rich

Wall Street loves it because it is boosting the value of stocks, bonds, and other financial assets. Unfortunately, most of the financial assets in America are owned by the wealthiest 5% of Americans. In fact, the top 5% own about 80% of individually held stocks and over 90% of individual held bonds.

Most Americans have most of their wealth tied up in their houses. While the wealthy recovered much of their wealth as stocks and bonds doubled in value, the recovery of housing prices has been much slower. Although, much of the latest quantitative easing has been focused on mortgage prices, banks have been so strict on lending that although many of the richer people can take advantage of lower rates by refinancing or investing in real estate, most Americans cannot. Many borrowers are unable to refinance because they are underwater on their mortgage, unemployed, or have impaired credit. Although current 30-year mortgage rates may be around 3.5%, the average rate holders are paying is still around 5% or more.

2) Quantitative easing is not helping unemployment

Low rates are meant to stimulate business activity and trigger spending which in turn should boost hiring. But that just isn’t happening. Part of the reason is that although many companies are growing, much of the growth is happening in newer and faster growing markets overseas in places like Asia and Latin America. Also, with technological advances more companies are investing in machines or software that can increase efficiency and decrease the need for more workers.

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    • eHealer profile image

      Deborah 4 years ago from Las Vegas

      Hello Koshaugh, this is the result of "trickle down economics," it isn't working and never has. Great hub and voted up!

    • Mitch Alan profile image

      Mitch Alan 4 years ago from South Jersey

      eHealer, "Trickle down" does work when the market is allowed to work...in this case both the market and the monetary system are being artificially manipulated...less regulations and a natural, and in the short term painful, reboot is needed. We need to let things fail and then rebuild...no more "stimulus", "bailouts" or QE infinity...

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