To Be Made Sick by Medicine: Quantitative Easing and Inequality After the Financial Crisis
During the Global Financial Crisis, central banks attempted to counter the economic downturn by reinforcing their conventional policy toolset with an extensive range of unconventional monetary policies. Paramount amongst these policies was Quantitative Easing (QE) which involves the creation of electronic money to conduct large scale asset purchases. QE has been accused of increasing economic inequality from multiple political standpoints. By analytically weighing QE's effects on different groups of households, this paper attempts to establish whether the Federal Reserve System, the European Central Bank and the Bank of England fostered income and wealth inequality during the post crisis period in the areas under these institutions' purview. Before proceeding with this analysis, this paper also outlines the interplays existing between inequality and conventional monetary policy to counter central bankers' established view that inequality should be considered an irrelevant by product of their policy choices. When looking at QE, this paper argues that this policy fostered a divergence between the relative performances of financial markets and the rest of the economy, which consequently increased inequality. QE was designed with a bias towards effectively supporting financial markets, on which few wealthy households depend. As the benefits accrued by financial markets did not trickle down; this policy was relatively ineffective at supporting the rest of the economy, on which the majority of households rely.