Monetary authorities around the globe are levying a tax on investors and providing a subsidy to borrowers. Taxation and subsidies, as well as other wealth transfer payment schemes, have historically fallen within the realm of fiscal policy under the control of the electorate.
Classical economics would tell us that the pricing distortions created by the current global regimes of QE will lead to a suboptimal allocation of capital and investment, which will result in lower output and lower standards of living over time……
The cost of QE is greater than the income lost to savers and investors. The long-term consequence of the new monetary orthodoxy is likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity. [Link]
Very good piece by Scott Minerd in FT. The full piece is well worth a read.
[Postscript: I quickly checked out his Twitter handle. I am not sure if it is the same thoughtful person who wrote this FT article. Will leave it at that]
As for the impact of QE, if more proof were needed of its short-run mirage of benefits and long-run real costs, check out this Bloomberg story on home prices running way ahead of wage growth and the accompanying charts.
A very pertinent set of observations in that article:
The trend illustrates the limited impact of the Federal Reserve’s decision to include mortgage-backed securities in its unprecedented asset-buying program. The Fed bought more than $1 trillion of those securities to prop up the housing market after it collapsed and helped trigger the worst recession in the post-World War II era.
With the economy improving and home prices climbing, central bankers seem to have achieved at least part of their goal. However, investors have reaped much of the benefits of rising prices, while meaningful wage growth — and with it the ability of many Americans to buy homes — has yet to materialize. That’s been one reason housing has posted such inconsistent progress over the past two years, even with mortgage rates near historical lows.