The Morass That Swallowed the Middle Class

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

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”