It is incredibly difficult to determine whether any economic policy is effective. If the plan's policy prescriptions and estimated results are used as a measuring stick, then quantitative easing, or QE, has not been effective. However, there are economists, analysts and policymakers who argue that QE have prevented economic conditions from becoming even worse. This claim, though, is what logicians call a "counterfactual," meaning it is impossible to refute or prove. There is even division among economic theorists about the hypothetical efficacy of large-scale asset purchases such as QE.

At the time the Federal Reserve launched into quantitative easing in March 2009, then-Fed chairman Ben Bernanke admitted that the program, which the Fed calls large scale asset purchases, or LSAP, was "experimental." A stimulus plan of that proportion had never been attempted previously, and the Fed eventually doubled and tripled down on its strategy with subsequent QE plans. The proposal, unlimited and continuous increases in the money stock by purchasing government bonds and private financial assets, kept interest rates near zero for years and increased the balance sheet of the Federal Reserve exponentially.

When a central bank purchases financial assets by using money it creates out of thin air, it creates a new liability: the new money. Modern Keynesian economic policies, which the Federal Reserve more or less follows, prefer a normal money expansion through targeted purchases of government bonds. The purported impacts of such expansion have little traction when interest rates hit zero, however. This led to QE, which was a last-ditch effort by the central bank to stimulate borrowing and spending in the economy.

The goal of QE was to lower unemployment, generate a little bit of inflation and increase aggregate demand. In October of 2013, Lacy Hunt, former senior economist at the Dallas Fed, wrote that academic studies had shown the Fed's efforts to be ineffective and LSAP cannot shift the aggregate demand curve. Dr. Robert Hall, member of the National Bureau of Economic Research Cycle Dating Committee, suggested at an August 2013 Jackson Hole Monetary Conference that "an expansion of reserves actually contracts the economy." In effect, Dr. Hall stated that QE made economic conditions worse.

One principle problem with QE, or any asset purchase program, is that it does little to affect the kind of production that actually causes economies to grow. Rather than encouraging real capital investment to be allocated toward the ends consumers demand through the price system, QE encourages debt accumulation and quick consumption by keeping interest rates lower than their market clearing levels. The hope is that stimulating spending and providing liquidity will trigger productive expansion, the same as if a person is jump-starting a car engine.

Sustainable economic growth, however, is generated when companies are able to produce an economically valuable product at increasingly efficient levels. This expands the productive capacity of the existing resource stock, leading to demand for labor and higher standards of living. QE, on the other hand, has thus far resulted in little more than padding the reserves of large commercial banks and lowering yields across the market.

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