What Will QE2's Legacy Be?

The Fed’s program has attracted a number of critics, but its long-term effects are still up for debate.

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Schreft says emerging economies are responsible for some of the blame for their higher inflation, because some countries, like China, won't allow their currencies to appreciate. She argues that these countries have made growth, above all else, their No. 1 priority. "If you're looking for where to invest to get the highest return, where are you going to go? You're going to go to these rapidly growing countries," she says. "It would be happening without QE2." Emerging market countries came out of the recession much better off than their developed counterparts, and investors have been attracted to their higher growth. At this stage of development, Schreft says high inflation is something that emerging economies have to deal with.

[See Forget the BRICs: How to Invest in Emerging Markets.]

Dangerous precedents have been set. Sica says the QE2 program has been a failure. Its biggest accomplishment, he says, has been to bloat the Fed's already oversized balance sheet. His worry is that this round of quantitative easing will set a precedent for how the Fed will deal with slow growth in the future. After the latest batch winds down, Sica says he expects a third round of quantitative easing. "There's a lot of talk about a QE3 because there's still a significant amount of sluggishness," he says. "I believe QE3 will be about bailing out municipalities that are in trouble because they have overleveraged themselves."

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