Because the Fed is suppressing bond yields with their asset purchases. This artificially distorts many things in the market, generally towards a risk on fashion

Because the Fed is suppressing bond yields with their asset purchases. This artificially distorts many things in the market, generally towards a risk on fashion. It's a big reason that housing is having an epic, historic rally, through suppressed 10y yields which tend to lead to lower mortgage rates. If you look at the summary of Fed purchases, published monthly, they are buying bonds across all maturities, not just short term bonds as they've done in the past. It makes closing the bottle again more difficult. The Fed is effectively monetizing the US Government deficit by buying ~60% of all new treasuries issued (bank buys bonds and sells to the Fed). And a lot of it relates to psychology of the markets. They continue to pour gasoline and encourage risk taking at exactly the wrong time. It's likely this money will eventually make its way into circulation... it depends on consumer credit patterns. But the money won't leave the supply until the purchased bonds fully mature, which can be up to 30 years. So yes, QE needs to end, regardless of whether the money ends up locked away in a bank's balance sheet. I believe the Federal Reserve should enact the best risk adjusted policy, not the best policy for the immediate term, which is their new mantra. The medium-long term risks to their current policy far outweigh the benefit at this point. Easy money policies always look more appealing from a short term perspective... always. That's why when populism takes over the monetary system, you see these policies proliferate, often with disastrous consequences. Look at the currencies of many South American countries for evidence of this.