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A combination of increased asset prices, lower real wages and a weaker currency will boost profits.
But Mr. Rosengren, who holds a doctorate in economics from the University of Wisconsin, said the available research showed clear evidence that the Fed's previous asset purchases had economic benefits, including increased asset prices, lower borrowing costs and a weaker dollar.
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It would increase asset prices and increased wealth would lead to higher consumption.
Two purposes of quantitative easing (QE) that few seem to understand are to weaken the currency and increase asset prices.
QE works through central-bank asset purchases that boost money supply; push investors to reallocate portfolios to riskier assets; increase asset prices and reduce bond yields.
Some of it went just into the balance sheet and wasn't lent out, but some of it went to increasing asset prices.
QE has worked, insofar as it has worked at all, by increasing asset prices over and above the level they would otherwise have been.
The idea is to give investors a chance to make money and to get illiquid markets moving and help increase asset prices toward the levels that banks are holding them, thereby minimizing further losses if they offload them.
And he dismisses the great new hope of regulators - macroprudential policyThe argument that macroprudential policies can be used to contain such financial excesses is a chimera - unconventional monetary policy stimulates the economy precisely by increasing asset prices and the ability to borrow, which prudential regulation aims to address.
Greenspan had taken the view that the central bank shouldn't question increasing asset prices, it should only take action when they started to fall.
An improvement in the quality of information has two effects on the ex ante welfare of individual countries: A direct effect that increases the efficiency of global capital allocation and welfare, and an indirect general equilibrium effect that increases asset price volatility and may decrease welfare.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com