“Quantitative Easing”, the new name for currency devaluation or deliberate inflation, is popular with lefty economists like Paul Krugman. The history of inflation-favoritism on the left goes back to William Jennings Bryan, who sought inflation to get farmers out of debt they couldn’t pay. In the 20th century, leftist economists pressed inflation onto presidents to weaken the middle class fixation on debt and austerity. But as with most things that come from the top down, quantitative easing now works primarily for the benefit of those at the top of the pyramid.
QE as a growth policy …favors large existing firms over new, startup firms. Large public firms can borrow from public markets at artificially low rates while startups are starved of capital. Fed policy aimed at supporting stock prices of existing firms creates an incentive for investors to favor these large – Fed safe – firms while shunning the risk of deploying capital in startup firms. Unfortunately, jobs are not created by large incumbent firms. They are created by entrepreneurial start up firms and QE limits their attractiveness as investments. Large government also tends to favor large incumbent firms who have the wherewithal to lobby politicians for tax breaks and other crony capitalist devices. Even when government policy does favor smaller startup firms it tends to make investments based on political considerations rather than sound business practices. The results have not been pretty.
By Joseph Calhoun