Quantitative Easing

Full Name
2008 - 2014 Quantitative Easing
Event Type

During and after the 2008 Financial Crisis, the Federal Reserve engaged in a series of asset purchases that greatly increased its balance sheet and lowered interest rates.

  • During this short period of time the Federal Reserver more than doubled its balance sheet
    • Went from ~925 billion to ~2,250 billion
    • The Fed purchased bonds with these funds
    • The significant buying pressure pushed interest rates down

Quantitative Easing Criticisms

  • The extra money flooded the stock, bond and real estate markets
  • This caused the prices of these assets to skyrocket
  • This made housing unaffordable for many people in the US
  • QE drove down interest rates - which vastly reduced the incomes of US Savers and eroded their asset values from inflation
  • By driving up asset prices and driving down interest rates, it vastly increased the wealth divide
  • QE did not help the average US citizen (main street).  It did save large Wallstreet banks that were about to fail
  • Resulted in a long-term period of negative real interest rates:

Reasons for QE

  • Fed claimed that it would increase share prices and thus consumption: Wealth Effect