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Quantitative Easing as a Means of Reducing Unemployment: A New Version of Trickle-Down Economics

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  • John Watkins

Abstract

Quantitative easing represents a variation of trickle-down economics. The presumption is that asset purchases by the Federal Reserve (Fed) benefit everyone. The policy involves increasing the prices of treasury bonds and mortgage-backed assets to stimulate output and employment. Quantitative easing acts on balance sheets. It works through the price system by affecting the structure of prices, and hence wealth. The unemployed, lacking assets, are not directly affected by changes in asset prices. The unemployed are dependent on policies that generate income. While Fed intervention prevented a collapse in asset prices, its effect on the real economy remains tenuous. Data suggests that the policy has exacerbated the inequality in the distribution of wealth and income, has done little to reduce unemployment, and has violated the principles of social justice. The policy contrast sharply with fiscal policy employed during WWII, which promoted greater equality in the distribution of income.

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  • John Watkins, 2014. "Quantitative Easing as a Means of Reducing Unemployment: A New Version of Trickle-Down Economics," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(2), pages 431-440.
    • Handle: RePEc:mes:jeciss:v:48:y:2014:i:2:p:431-440
    DOI: 10.2753/JEI0021-3624480217
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    Cited by:

    1. Inda Mulaahmetovic, 2022. "Evaluating the Effectiveness of Quantitative Easing Measures of the Federal Reserve and the European Central Bank," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 12(3), pages 141-163.
    2. Ayako Saiki & Jon Frost, 2014. "How does unconventional monetary policy affect inequality? Evidence from Japan," DNB Working Papers 423, Netherlands Central Bank, Research Department.
    3. Ayako Saiki & Jon Frost, 2014. "Does unconventional monetary policy affect inequality? Evidence from Japan," Applied Economics, Taylor & Francis Journals, vol. 46(36), pages 4445-4454, December.
    4. Natalia Martín Fuentes & Elena Bárcena Martín & Salvador Pérez Moreno, "undated". "Who takes the cake? The heterogeneous effect of ECB accommodative monetary policy across income classes," Working Papers 657, ECINEQ, Society for the Study of Economic Inequality.

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