Some of you may have seen this astonishing article in the Wall Street Journal (of all places). It is an amazing expose of the Fed’s QE program, inasmuch as an insider declares that it is, in his own words, “the greatest backdoor Wall Street bailout of all time.”
These are not the rantings of some lame-ass blogger like myself. These are words right from the mouth of a highly-placed Fed insider. The writer isn’t just some back-office clerk, either; he was hand-picked to purchase a trillion and a quarter dollars of mortgages for the Fed. Again, from the author:
In its almost 100-year history, the Fed had never bought one mortgage bond. Now my program was buying so many each day through active, unscripted trading that we constantly risked driving bond prices too high and crashing global confidence in key financial markets. We were working feverishly to preserve the impression that the Fed knew what it was doing.
Mr. Huszar describes how he began to doubt the efficacy of QE, and he left the Fed when he realized it was simply a massive transfer of wealth from future taxpayers to present Wall Street management. Most damning of all:
And the impact? Even by the Fed’s sunniest calculations, aggressive QE over five years has generated only a few percentage points of U.S. growth. By contrast, experts outside the Fed, such as Mohammed El Erian at the Pimco investment firm, suggest that the Fed may have created and spent over $4 trillion for a total return of as little as 0.25% of GDP (i.e., a mere $40 billion bump in U.S. economic output). Both of those estimates indicate that QE isn’t really working.
Yeah, I’d say if I invested $4,000,000,000,000 into something and got a return of 0.25%, I’d conclude it “isn’t really working.”
But America has its WalMart and The View and Thor. In a way, I’m starting to think Blankfein and Dimon deserve all their money. Why shouldn’t they fleece such willing sheep?