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Brace Yourself: This Is What the Fed’s QE Has Done for Our Economy

The Fed's QE (quantitative easing) program has created multiple trillions of dollars since it first started in 2008.

But now there are signs the QE policy will finally come to a close.

On June 19, Federal Reserve Chairman Ben Bernanke announced the Fed may start to taper its QE by the end of the year if it met an unemployment target of 7%, while keeping a targeted inflation rate at 2%.

Indeed, today's (Wednesday) Fed minutes reflect that policymakers are forming a plan to taper the stimulus sometime this year and plan for a full stop come mid-2014.

At the outset, the Fed hoped to stimulate a stagnant U.S. economy by increasing the money supply.

And now, five years later, some mainstream media would have you think the economy is in decent shape…

A recent Associated Press article described the U.S. economy as "growing at a steady pace." Other analysts feel the economy is stable and a long shot from the 1970s, when the Fed churned out cash on a much smaller scale, which led to damaging rates of inflation.

But the truth is the economy only appears stable.

Beneath the surface, the Fed is roiling, building up to a breakdown that could be worse than 2008's subprime/solvency crisis.

Much like prodding a sick child, the symptoms of economic bad health are there, even if you can't see them at first glance.

Take U.S. car inventories, for example…

3.27 million new cars are presently glutting up dealerships across the U.S. – a greater excess than has been seen in nearly five years.

In fact, that's enough automobiles to equip every man, woman, and child in the state of Iowa, and nearly enough to equal the number of iPhones added to Verizon's network last quarter.

Last year, there were 2.7 million fewer vehicles in the nation's car inventory; back in 2011 it was a million fewer than that.

With 70% of the economy powered by consumer spending, the indications that auto consumers aren't spending is a danger sign.

And the retail sector continues to show mixed results that suggest consumer spending isn't rising to levels needed for a healthy economy.

When paired with another measure of economic health, this glut could very well feed into a scary cycle that will put a major drag on the economy – all this despite the Fed's attempts to goose activity with QE…

The Car Glut Will Affect Unemployment

Even though the unemployment rate fell to 7.4% in July – the lowest rate since December 2008 – U.S. joblessness is still a huge concern.

A significant part of the drop is due to discouraged workers exiting the labor force. Overall the labor force dropped by 37,000 in July, marking a 35-year low in the percentage of working-age Americans looking for jobs.

Moreover, the number of temporary workers who want full-time jobs continues to increase, as the below chart illustrates:

The Fed's QE program is supposed to stimulate the creation of high-paying, full-time jobs, but instead, we're getting a lot of part-time jobs: through the first seven months of 2013, 953,000 jobs have been created; a full 731,000 of those, or 77%, have been part-time.

In sum, over 4 million people have been out of work for more than six months, and a doleful 11.5 million are looking for work in total.

22.1 million Americans are either unemployed or underemployed.

And numbers like the car inventory glut show us joblessness is about to get worse…

Join the conversation. Click here to jump to comments…

  1. Dr. Richard Kaufman | August 23, 2013

    7.4% unemployment?

    What weird stuff have you been smoking?

    "Official" government figures are PURE BALONEY!

  2. Tom Long | August 23, 2013

    I told my wife weeks ago that Automobile Inventories were Way To High. Drive by any GM Dealership, not the Chevy Trucks, cars and used vehicles for sale. People have now added More Debt to themselves than was evident back in 2008. The chicken's will come home to roost shortly, I think. My advice: Get Out of Debt, Now. House prices are increasing. What a joke.

  3. Q | August 23, 2013

    Isn't this what took place during the depression.

    • Brad M | August 27, 2013

      Good call. Yes, there was a market crash ( 1929 ), followed by a brief recovery ( or more like stabalization ), then the bottom fell out again in '32. In 2008 the market crashed, now there has been stabalization and some recovery, there may very well be another downturn on the way.

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