It defies both common sense and monetary theory – or at least until you find out where all that QE3 money ended up.
Here's a chart that illustrates the growth in the U.S. money supply, mostly as a result of QE1 through QE3:
Now here's a chart of the amount of excess reserves sitting in private banks. See any similarities?
Note that until the 2008 financial crisis, those bank reserves were close to zero. Now they have swelled to nearly $1.9 trillion, almost all of which is the money produced by QE1 through QE3 and beyond.
In other words, more than 80% of the hundreds of billions of dollars that the Fed created supposedly to stimulate the U.S. economy never made it to the U.S. economy.
This is why some critics have derided QE3 as "pushing on a string."
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.