The Federal Reserve announced on Wednesday it will continue its unprecedented $85 billion a month bond-buying strategy despite earlier indications it would begin tapering its controversial quantitative easing policies.
The announcement comes as the Fed has downgraded its outlook for the U.S. economy. The Fed now projects that the economy will grow at an anemic 2% to 2.3%, rather than its earlier forecast of 2.3% to 2.6% growth.
The Fed’s quantitative easing policies have already pumped $2.8 trillion into the economy, but a new Reuters poll finds that 73% of Americans do not even know what quantitative easing means. Quantitative easing is when the Federal Reserve buys securities to drive down interest rates and prop up the economy.
The Dow and S&P 500 surged to record highs after the Fed’s announcement; the Fed’s easy-money policies and suppressed interest rates give banks free money to invest and leverage.
“The Fed has been robbing America’s poor and middle class and essentially underwriting the wealthy, the big banks and big business,” explains Jonathon Trugman, writing in the NY Post. “The twisted maneuvers of grand larceny-like proportions have underwritten the greatest transfer of wealth this generation has ever seen.”
Bankrate.com senior financial analyst Greg McBride said, “The primary goal here is to push money into riskier assets, whether it’s equities or the housing market.”
The Federal Reserve’s balance sheet now stands at an unprecedented $3.6 trillion. Prior to the recession, the Fed’s balance sheet was less than $1 trillion.
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