The Fed’s monetary policies since 2008 have undermined the creation of a growth-producing economic environment

In June, much to the consternation of financial markets, the Chairman of the Federal Reserve, Ben Bernanke, warned that the current program of Quantitative Easing (QE) would likely to come to an end in 2014. But has this measure been effective in stimulating recovery? Looking at QE’s record, Steven Horwitz argues that by paying a small amount of interest on reserve balances, the Fed has discouraged banks from lending, leading to a de facto bailout program. Now, the Fed faces the very real problem of how to avoid inflation as QE ends and recovery begins.