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"....liquidity injections and financial engineering are insufficient to deal with the challenges that the US faces. Without meaningful structural reforms, part of the Fed's liquidity injection will (cause) another surge of capital flows to other countries," precisely what they don't need or want.
Fed policy will force other countries to protect their currencies, perhaps by capital controls, protectionism and other measures. As a result, the dollar's reserve currency status will erode, what's now happening incrementally.
"The unfortunate conclusion is that QE II will be of limited success in sustaining high growth and job creation in the US, and will complicate life for many other countries." That seems what Fed policy intends, wrecking world economies for greater FIRE sector profits and empowerment. Will it work is at issue, or will reckless Fed meddling destroy predators with their prey.
Economics Nobel laureate Christopher Pissarides believes QE II won't produce jobs. In a brief comment, economics Nobel laureate Paul Krugman also expressed doubt it can work. Former Fed vice chairman Donald Kohn said it won't turn around the US economy. At best, it might help marginally. Economics Nobel laureate Joseph Stiglitz in the Financial Times said it's "folly to place all our trust in the Fed," adding:
"It should be obvious that monetary policy has not worked to get the economy out of its current doldrums." Having failed so far, "monetary authorities have turned to quantitative easing. Even most advocates of monetary policy agree the impact of this is uncertain. What they seldom note, though are the potential long-term costs."
Stiglitz prefers fiscal over monetary policy, targeting education, technology and infrastructure. Even though government debt will be increased, "the assets on the other side of the balance sheet are increased commensurately," and over time, their return on investment far exceeds the cost. On the other hand, planned austerity, hoping monetary policy can work is "sheer folly." Machiavellian destructiveness better describes it.
Economist David Rosenberg is also skeptical, saying in a November 4 commentary that he sees QE II having "no visible impact on the willingness to borrow, the money multiplier or velocity, which is what we would need to see to declare this radical policy experiment a success." QE I also provided none. It was a total flop, suggesting QE II won't fare better. Worse still, Rosenberg sees destructive currency wars intensifying, leading to trade wars that don't "tend to end very well."
Market analyst Bob Chapman calls QE II a futile way to keep the economy and financial system afloat. For one thing, it drives out real investment, "the kind that creates jobs and profits." Fed policies are the opposite, producing debt and speculative excess. In the process, "they also crowd out other borrowers, which ultimately leads to higher interest rates and offsets banks' ability to lend." Moreover, consumers are gravely harmed. Their purchasing power declines, the economy, as a result, pushed "deeper into depression."
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