Dallas Federal Reserve Bank president Richard Fisher said:
I
firmly believe that the Federal Reserve has already pressed the limits
of monetary policy. So-called QE2, to my way of thinking, was of
doubtful efficacy, which is why I did not support it to begin with. But
even if you believe the costs of QE2 were worth its purported benefits,
you would be hard pressed to now say that still more liquidity, or more
fuel, is called for given the more than $1.5 trillion in excess bank
reserves and the substantial liquid holdings above the normal working
capital needs of corporate businesses.
One
of the overlooked consequences of the Federal Reserve’s recent rounds
of monetary stimulus is the adverse impact those policies have had on
the interest income of savers. The prolonged and abnormally low
interest-rate structure put in place by the Fed has made life
particularly difficult for retirees and others who depend on
conservative interest-sensitive investments. But the negative effects do
not stop there. They spillover into the overall performance of the
economy.
Our estimates show that these negative effects, resulting from the
Fed’s two rounds of quantitative easing (QE1 and QE2), are sizable and
may help account for the lackluster character of the current recovery.
By lowering interest rates to historically unprecedented levels, the
Fed’s policy deprives savers of interest income they normally would have
earned on the interest-sensitive assets they hold. Thus, there is an
income channel that no one is talking about, and its negative impact can
be powerful.
