On Wednesday, the Federal Reserve ended its historic and controversial economic stimulus program of purchasing bonds known as Quantitative Easing (QE). Since 2008, the Fed has purchased more than $3.7 trillion (yes, trillion with a 't') in assets swelling its balance sheet to over $4.5 trillion. This money printing by the Fed was intended to stimulate economic activity, lower interest rates, and lower unemployment. Let's examine how they did.
Stimulate Economic Activity: Since the middle of 2009, U.S. economic activity as measured by Gross Domestic Product (GDP), has remained mostly positive. Some of that growth can be attributed to the normal recovery phase our economy historically enters after recessions, and some of that growth can be attributed to an additional $6 trillion in debt (spending) by our federal government.
Lower Interest Rates: Interest rates have remained historically low during QE as the Fed has become the largest buyer of U.S. treasuries. Low rates are great for borrowers, but they are not so great for savers, particularly seniors who tend to have more money invested in CDs and savings accounts.
Lower Unemployment: The unemployment rate peaked in the fall of 2009 at 10.0% and now stands at 5.9%. While on the surface that seems like QE accomplished its goal by lowering the unemployment rate, the labor force participation rate (percentage of adults either working or looking for work) has dropped from 66% to below 63% accounting for nearly all the "reduction" in unemployment.
