Tag: 1%

Inequality Rising

~ Karen Petrou ~ 1 Comment

By Karen Petrou

As the COVID crisis continues, some have speculated that wealth inequality will drop because it did in the 1400s during the Black Death.  However, this cure is not only of course considerably worse than the disease, but it’s also no cure.  Economic inequality is a cumulative process – the worse off you are, the worse off you get unless something positive reverses this compound effect.  Conversely, the better off, the still more comfortable unless something comes along to redistribute your gains, however well or ill gotten.  Given how unequal the U.S. was before COVID, it will surely get only more so now, especially if the Fed stays the course with trillions for financial markets and pennies for everyone else. Continue reading “Inequality Rising” →

Dark Corners in “Good Places”

~ Karen Petrou ~ 4 Comments

By Karen Petrou and Matthew Shaw

Shortly before Thanksgiving, a new study documented that U.S. life expectancy since 2010 has taken a sharp turn for the worse for younger Americans regardless of race, gender, or education.  We knew that opioids were devastating, but this study confirmed others showing also that the overall reversal in U.S. life expectancy is due to more profound and mysterious afflictions.  Doctors are flummoxed by why U.S. mortality is so much higher than that in other advanced countries, where life expectancy continues to increase for younger citizens, concluding that something endemic is going on behind the epidemic of “diseases of despair.”  The latest inequality data demonstrate yet again that the economic “good place”  that comforts Fed policy-makers is to be found only in the 100th floor penthouses that are the eyries of the one percent.  We thought the data more than dispiriting when we analyzed the Fed’s first distributional financial account; now, we find them devastating, not to mention evil omens of a polarized, angry electorate heading to the 2020 polls. Continue reading “Dark Corners in “Good Places”” →

The Morass That Swallowed the Middle Class

~ Matthew Shaw ~ 1 Comment

By Matthew Shaw

While much of the inequality debate focuses on the gains of “the 1%,” less attention has been paid to the economic well-being of what is broadly termed the middle class, which is all too often just lumped into the other “99%.”  However, focusing the debate on only the 1% obscures important trends within each of these groups, including that there is ample evidence that the gains of the 1% are largely driven by the wealthiest among this already-elite group along with diminishing prospects for the rest of us.  Today, we look at one of these groups with diminishing prospects and a concerning trend recently highlighted by IMF staff: the “hollowing out” of the U.S. middle class.  Continue reading “The Morass That Swallowed the Middle Class” →

Another Reason to Avoid Economic Inequality: Increased Financial-Crisis Risk

~ Karen Petrou ~ 3 Comments

By Karen Shaw Petrou

In our post on the inequality impact of quantitative easing, we said that QE-driven asset valuations not only favor the rich, but in concert with ultra-low rates also sows the seeds for the type of asset-bubble that all too often leads to crashes and thus still more macroeconomic misery and inequality.  A new staff paper from the Federal Reserve Bank of San Francisco finds that, even if the asset-price bubble doesn’t burst, inequality on its own could stoke the next U.S. financial crisis, with heightened inequality also found to be the best crisis predictor of all the other, more typical measures that the paper surveys.
 Continue reading “Another Reason to Avoid Economic Inequality: Increased Financial-Crisis Risk” →