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Monetary morphs into fiscal: the Fed's great adventure

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  • Anthony F. Herbst

Abstract

Post 2008 US economic policy has centered on Quantitative Easing, QE. The expectation, or ostensible hope, was that injections of money would stimulate economic recovery and growth in the real sector. However, seven years later, the economy languishes. Monetary measures have not brought recovery to the real sector. It has generally escaped notice, but QE has had the effect of a tax increase on savers, retirees, and those with fixed or inelastic wages. Absent prospects for profitable investment in plant and equipment, industry will not invest even with historically low interest rates. Those who might save if interest returns rewarded it have incentive to spend and to borrow instead, but have not done enough to launch recovery.

Suggested Citation

  • Anthony F. Herbst, 2015. "Monetary morphs into fiscal: the Fed's great adventure," Economics and Business Letters, Oviedo University Press, vol. 4(2), pages 79-86.
    • Handle: RePEc:ove:journl:aid:10590
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/10590
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    References listed on IDEAS

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    1. Herbst, Anthony F. & Wu, Joseph S.K. & Ho, Chi Pui, 2014. "Quantitative easing in an open economy—Not a liquidity but a reserve trap," Global Finance Journal, Elsevier, vol. 25(1), pages 1-16.
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