Yes, prices eventually adjusting to new purchasing power could be problematic. QE for the people is a good spin on it. UBI could be indexed to inflation.
??? QE reward those who have the ability to borrow with cheap money and punish those who save by inflating away their savings. It is directly responsible for a widening wealth gap as those who "have" have vastly superior borrowing capability. This is ET and you know full well what is the implied interest rate of those future contracts.
As I mentioned, QE is not helpful in narrowing the 'wealth gap,' but neither is it responsible for the gap. The wealth gap existed and was growing before QE and it is still growing now that QE has ended. The idea that QE is responsible for the wealth gap appears to be based on a misconception with regard to what QE is. It is likely in fact that if one could look at the growth rate of the wealth gap closely enough, one would find that during the initial phase of QE the rate of growth in the wealth gap declined because the return on capital declined even more rapidly than the economic growth rate declined. When an economy is entering recession, a common response of the central bank is to lower the wholesale cost of money, i.e., lower the "Fed Funds Rate". The Fed may say that they are "targeting" a higher aggregate bank reserve balance, but what they actually target is a lower Fed funds rate -- the consequences are a higher aggregate bank reserve balance. Because, as a rule, the Fed does not pay interest on Bank reserve accounts, banks naturally try to hold no more in their reserve accounts than the Fed requires. Any excess reserves they will try to lend out, so an aggregate reserve balance above the requirement will have the affect of driving the Fed Funds rate rapidly to zero. The Fed, however, cannot operate independent of fiscal policy, and so its operations must be in coordination with the Treasury. What this means in practice is the Fed's operations are largely reactive in nature. They find themselves constantly reacting to both Treasury actions and economic realities. When the Great recession hit the economy, the Treasury quickly stepped up its spending through the Troubled Assets Relief Program. And in conjunction with this they issued the better part of a trillion dollars in bonds. The Government also began a number of economic stimulus programs, and issued still more bonds. At the same time, The Fed agreed to acquire mortgage backed securities from banks who could not meet their mark to market accounting requirement, because the MBS they held could no longer be fairly valued with a collapsed market. So the Fed, from banks that were otherwise solvent, bought these securities and credited the banks' reserve accounts. The Fed also began regular buying on the secondary market of large quantities of Treasuries. All of the money the Fed helped to pumped into the economy was credited to reserve accounts. Similarly, Treasury spending was also credited to reserve accounts. The net result of this Treasury-Fed coordinated action was huge deficit spending -- deficit spending is by definition all spending in excess of revenues. Deficit spending causes an equivalent increase, equal to the penny, of bank reserve accounts, which in normal times the Fed drains via bond sales. With so much money flowing into bank reserves, while the demand for new credit was virtually drying up, the Fed funds rate was driven rapidly toward zero. In order to put a floor under the funds rate, the Central bank then began paying a very small interest on reserves. The part of this reaction to the "Great Recession" involving Fed bond buying is referred to as Quantitative Easing, or QE. In other words, the Fed brought the Fund Rate down to near zero (The "Easing Part") by buying on the secondary market huge quantities of Treasury securities (The quantitative part). In doing so the Fed intentionally targeted a near zero funds rate, while at the same time rescuing many banks from their mark to market dilemma by buying temporarily illiquid securities and crediting reserve accounts accordingly. Quite a few banks could not be saved because they were fundamentally insolvent. These banks underwent resolution. Still other banks that were technically insolvent, or on the verge of insolvency, were rescued by "arranged marriages" with stronger banks. The Treasury Secretary acted as the Match Maker in Chief! If QE is not responsible for the wealth gap what, or who, is? When two specific conditions exist simultaneously in an economy, the natural outcome is a wealth disparity that grow greater over time. The two conditions are 1. an unequal distribution of capital which is a natural condition driven among other thing by our human nature, and 2. a return on capital in an economy that is greater than the growth rate of the economy. It can be argued whether the second condition is natural or man made, but it is unquestionably a common attribute in economies world wide, and I would say, in particular, a rather striking attribute of the U.S. economy. So the existence of a wealth gap seems to be a near universal phenomenon, but the size of the gap and its growth rate vary widely from one economy to the next. In the U.S., key drivers accelerating the growth rate of the wealth gap have been the taxation of unearned income at lower rates than earned, and a dramatic collapse of progressiveness in the marginal income tax rate structure. Both of these two causes are prominent, and highly popular, features of what is often referred to as supply-side economic stimulus or "trickle down" economics, which became a political rallying cry and economic fad in the 1980s during President Reagan's administration. The fad has been with us, waxing and waning but never leaving, ever since. The growth of the wealth gap follows a similar function to that of compound interest, differing from that function by the amount of income from capital consumed by living expenses versus the amount left to grow. The gap therefore exhibits more exponential character with time -- one can only spend so much.. It's unlikely we can do anything about wealth gaps per se, and it is not clear that we should want to. But we can do a great deal about a gap's growth rate. We could even narrow the gap, and we have, rather dramatically at times. For example, the period 1910 to 1950 saw a dramatic reduction in wealth disparity in the European countries, a consequence of war! To do that in times of peaceful living , however, seems politically far more difficult. Tomas Piketty's monograph, "Capital in the Twenty-First Century" is the most prominent new study of wealth distribution in modern economies and includes a thorough history. It represents current thinking on the subject. I would suggest this book to anyone interested in the root cause of the "wealth gap". I will leave you with this thought from Piketty, pg. 20: "...one should be wary of any economic determinism in regard to inequalities of wealth and income. The history of the distribution of wealth has been deeply political, and it cannot be reduced to purely economic mechanisms. In particular, the reduction of inequality that took place in most developed countries between 1910 and 1950 was above all a consequence of war and of policies adopted to cope with the shocks of war. Similarly, the resurgence of inequality after 1980 is due largely to the political shifts of the past several decades, especially in regard to taxation and finance." Will Rogers and something to say about trickle down economics in 1932... "This election was lost four and five and six years ago not this year. They dident start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickled down. Put it uphill and let it go and it will reach the dryest little spot. But he dident know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night anyhow. But it will at least have passed through the poor fellow’s hands. They saved the big banks but the little ones went up the flue."