As they meet on Tuesday and Wednesday, policymakers at the Federal Reserve have a major problem.
There’s nothing the central bankers would like to do more than scale back on the disastrous quantitative easing bond-buying program that celebrated its fifth anniversary last month.
The nearly $4 trillion in bonds and mortgages purchased by the Fed in this unconventional program has managed to keep interest rates unnaturally low.
But in doing so, the Fed has accomplished what it wasn’t expecting: It transferred enormous amounts of wealth from savers to speculators.
So while things like stocks, precious art and investment real estate are soaring in value, the interest income received by millions of Americans with savings accounts is down to nothing.
More important, QE — as the four phases of the program are called — hasn’t done much to improve the nation’s economy.
The Fed’s problem: It needs to find an upward blip in the economy that will give it an excuse to scale back, or taper.
I still believe the Fed is too concerned about the economy and the financial markets to give up its QE crutch.