By Karen Petrou
On Friday, March 22, the Federal Reserve finally conceded that aggregates and averages mask all-important economic facts, issuing for the first time the “Distributional Financial Accounts of the United States” (DFA). This will be a quarterly staff assessment of U.S. wealth equality – or, as its data forcefully demonstrate, the lack thereof. However, the DFA does something more: it also tracks wealth inequality across the business-cycle over almost three decades, showing clearly that equity-price increases exacerbate wealth inequality. As a result, the more the Fed strengthens the stock market by keeping rates low and its portfolio huge, the worse U.S. wealth inequality grows. Continue reading “Greenspan’s Market Put is Powell’s Inequality Short”
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”