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Fed Targeting the Dollar All Along?

By Matthew Kerkhoff

 

The US is no longer engaged in quantitative easing, but remnants of the policy still remain. The most visible sign left behind is the large, four and a half trillion dollar balance sheet of the Federal Reserve.

 

If you’ve been following my commentary, you know that I don’t believe quantitative easing was all that effective, at least not by the means generally set forth.

 

The intended goal of QE was to add liquidity to the banking sector and suppress long-term interest rates. Both effects would theoretically entice consumers and business to borrow, spend, produce and invest, which in turn would rev up the economy.

 

In reality, both of these theoretical benefits never really materialized. Instead, it appears that currency devaluation may have been the real effect of the policy, and one of the main drivers of the recovery.

 

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