FXStreet (Delhi) – Rob Carnell, Chief International Economist at ING, suggests that when the US Federal Reserve first started quantitative easing (QE) at the end of 2008 and early 2009, few analysts gave much thought to the distributional effects that this policy would have. Key Quotes “But now that QE in the US is finished and the European Central Bank has embarked on its own aggressive QE programme in the Eurozone, we take a look at how QE has helped change the distribution of US wealth, altered incentives for saving/spending and consider what this implies for ongoing experiments with unconventional monetary easing. We conclude that QE has encouraged even greater disparity in incomes and wealth in the US, and that the net effects of QE on consumer spending are, at best, marginal. • Following the introduction of QE at the height of the financial crisis, approximately 83% of the wealth gains – and 80% of the income gains – have accrued to the top 10% of households by income. • Wealth effects, that should have added approximately 2% to consumer spending, have failed to deliver anything of the sort. We suspect this is partly due to higher inequality, and partly due to changing demographics, with older households suffering from reduced incomes on savings. • QE may also have drained spending power to the tune of 0.8% pa as a result of bigger household purchases of assets. • While low rates have also stimulated borrowing and hence consumption, this leaves households more indebted and therefore vulnerable to higher interest rates. • This is particularly true for lower income households.” For more information, read our latest forex news.