> > According to many people in favor of higher taxes, > > quantitative easing has no ill effects. Why don't they > > just ease $5B into existence? > > It incre

> > According to many people in favor of higher taxes, > > quantitative easing has no ill effects. Why don't they > > just ease $5B into existence? > > It increases inflation. Right now, it's better to have > more people employed/have the economy growing than it is > to have inflation below 2%. There's an orthodox misconception here that is taking some time to be fixed / properly understood by economists. Quantitative easing is nothing more than an asset swap for banks. It increases the reserves in the banking system, yes, but it does not actually put more money into the hands of people who will spend it in the real economy. Its effect is at best indirect: it pushes the interbank lending rate down, and that can increase the pool of potential borrowers. But the effect is marginal at best. Note in particular how the "money multiplier" dropped after QE: http://research.stlouisfed.org/fred2/series/MULT?cid=25 http://research.stlouisfed.org/fred2/series/MULT?cid=25