“The Federal Reserve’s stimulus measures aren’t having as strong an impact on the economy these days as people think, said former Fed Chairman Alan Greenspan.
Since the downturn, the Fed has sought to spur recovery by slashing interest rates to near zero and taken more unorthodox measures such as buying bonds like mortgage debt or Treasury holdings from banks, a stimulus tool known as quantitative easing that injects liquidity
into the economy to keep rates low and encourage investing and hiring.
Critics dub quantitative easing as printing money out of thin air that will fuel inflationary pressures down the road.
Either way, the Fed’s policies aren’t having much of an impact, especially while banks hold off on lending out all that fresh money.
“I’ve not commented about Fed policy since I got out of office, but I will say this: that whatever the Fed is doing, whether you like it or not, it’s not actually, in my judgment, having a major effect,” Greenspan told CNBC.
“The issue here is that they have created a very large expansion to the balance sheet that’s ended up as reserves on the asset side out of all the commercial banks and savings banks and that’s not being re-lent. And unless and until it is re-lent, it will not have a significant impact on the
economy,” Greenspan added.
“I think the Fed is not as big a player as most people think.”
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