Which doesn't disprove the gp. The Fed still has $4.5 trillion in assets on their books, when they had < $1 trillion pre-QE1. The Fed supported $3.5 trillion in risky assets long-term.

The Fed has paid US banks to hold onto currency reserves that were injected into them, effectively subsidizing more risky investments throughout the economy. This includes equity growth, equity distributions, low bond yields, kept the capitalization rate (ignoring Fed injections into banks) low, etc. Without keeping QE on the books, these other current market investments wouldn't have been possible.

QE has allowed risky debt to continue to float around the entire financial system without market forces quickly drowning the riskiest. Effectively the Fed is subsidizing the risk and the average person will pay when inflation finally picks up. Just because we still don't fully understand the new "laws of finance" while we are in this QE bubble doesn't mean the old laws of finance won't still apply when QE dissolves.

The Fed isn't giving money directly to the VCs (atlest that I know of). The fed is keeping interest rates low on Treasury Bonds low. The rationale for this is: if investors get a small return on a riskless investment, they will be willing to take bigger risks for less rewards. Theoretically this should increase the investment in Venture Capital firms.

I'm not making any kind of judgement to the effects of QE policy, simply stating a fact.

The point is that money _doesn't_ get from VCs to taxes. At least not in the same percentages as normal income.

All tax breaks are government subsidies. Tax rates that are lower on one class of income than another are tax breaks.

Its "Not Hotdog" all the way down.