The basis of Fed-created money is the full faith and credit of the United States, which ultimately be- longs to everyone. To the extent that quantita- tive easing (QE) — essentially, asset purchas- es with newly printed money — makes it artificially cheaper for wealthy individuals and hedge funds to borrow and speculate, the Fed is wasting that public resource making the rich richer.
Fed chairs have heard this critique repeat- edly during the past 14 years, and they have an answer: Working people would have suffered even more if not for the Fed’s intervention; speculative excess and inequality can and should be curbed through regulation and tax policy.
They have a point, too, but the Fed’s argu- ments lose traction as the emergencies that QE was intended to meet recede into the past and the possible downsides — including not only asset-price bubbles but also, now, gener- al inflation — loom larger.
One way to disarm radical critics would be for the Fed to show that its massive asset purchases were, in fact, extraordinary mea- sures, not the new normal. The central bank’s planned “taper” can’t come soon enough, if it isn’t already too late.