QE4EVA

There were pundits predicting outcomes on both sides prior to the Fed meeting last week. The mainstream expected a substantial QE3, and contrarians expected nothing more than extension of ZIRP. The Fed exceeded the expectations of both combined by announcing a never ending $40 billion QE purchase of mortgage backed securities plus ZIRP through mid-2015. But the Fed went even farther with plans to increase QE if the labor market did not respond fast enough.

I honestly leaned toward the contrarians with the US presidential election so close, and was shocked at the size, scope, and infinite pledge of fresh money printing. The Fed promised to continue to beat savers over the head until morale (labor market) improves. I am trying to remember a time in history when endless money printing solved an economic problem, but I can't. Every case I am aware of has ended in disaster.

Inflation is never uniformly distributed among products, services, or people. This will create some big winners and losers, but since inflationary pain is usually regressive, mostly lower income losers.