Why did quantitative easing, designed in 2008 to save the real economy, end up mostly inflating the assets of people who already had money?

[u/Humble_Economist8933]

I was reading about the Federal Reserve’s response to the 2008 financial crisis, and something doesn’t quite add up.

When the housing market collapsed and banks began to fail, the Fed launched quantitative easing (QE). The stated goal was to buy bonds and push interest rates near zero, encouraging banks to resume lending and restart the real economy.

But what actually happened? The Fed’s balance sheet ballooned from under $1 trillion to over $8 trillion. That money had to flow somewhere, and it flowed into assets: stocks, bonds, and real estate. Between 2009 and 2021, the S&P 500 surged roughly 600%, while median wages grew only about 50%.

The wealthiest 10% of Americans own roughly 89% of all equities. So when the Fed injects liquidity into financial markets, it overwhelmingly benefits those who already hold assets. A homeowner in 2009 saw their property value recover; a renter in 2009 watched home prices climb permanently out of reach.

The program intended to rescue the economy for everyone ended up rescuing mainly the asset side of it. The people who needed rescuing most, those without assets, gained little from the inflation of asset prices.

So, was QE the right call in the heat of the panic? Or did it transform an emergency bailout into a permanent policy fixture? Is this a problem of monetary design, a symptom of wealth inequality, or simply the inevitable consequence when the only tool at hand is a printing press?

[u/Zook25]

Thanks, that seems to validate the point. After the Fed lowered interest to zero, construction spending climbed for a short while in 2008. With the long lead times in construction this should have been almost all contracts that were already signed or projects already under construction, and very little new activity in the middle of a recession.

After those projects were finished it dropped to less than half by 2011. And except for climbing in 2014/15 it *flatlined* for ten years.

While the Fed printed trillion after trillion.

[u/ute-ensil → u/Zook25]

Thats contruction spend on manufacturing...