By Karen Petrou
Starting with our very first EconomicEquality blog post, we demonstrated the direct link between quantitative easing (QE) and the sharp rise in U.S. wealth inequality that differentiates this recovery from all that came before. QE exacerbates inequality because, combined with post-crisis rules and ultra-low rates, it creates a market dynamic in which banks hold huge excess-reserve balances instead of making equality-essential loans and markets relentlessly chase yield, increasing equity valuations and driving credit to borrowers such as highly-leveraged companies. In 2019, the Fed bulked up its portfolio in what is now known as QE-lite in hopes of rescuing the repo market, reinvigorating sputtering equity markets no matter the Fed’s ongoing insistence that this round of portfolio increases isn’t QE. Continue reading “Wheelies on the Yield Curve: Inequality, Disintermediation and the Hazards of New QE”
By Karen Petrou
When we started this blog in 2017, we began with a plea for the Federal Reserve to factor inequality into its monetary and regulatory policy equation. We showed at the start, here, here and here, that the Fed’s focus only on averages and aggregates obscures sharp polarization at each end of the U.S. income and wealth distribution. It is these polarizations, as we’ve repeatedly seen in blog posts that undermine the Fed’s ability to set the U.S. economy on a forward trajectory of shared prosperity and stable growth – i.e., to meet its dual mandate as Congress expressly defined it in the Humphrey-Hawkins Act of 1978. The Fed is still resolutely crafting monetary policy with its eyes firmly averted from increasing inequality. Continue reading “The Missing Middle Class”
By Karen Shaw Petrou
In her speech on September 26, FRB Gov. Brainard deploys a lot of data to raise, but then duck, what I think is the most critical question about post-crisis monetary policy: Is U.S. employment really “full” enough to justify wider wealth inequality that is in part the Fed’s fault? Chair Yellen and others defend quantitative easing (QE) and ultra-low rates on grounds that U.S. “full” employment will eventually be matched by growth, consumption, and resilient, robust recovery.
Continue reading “Why “Full” Employment is an Empty Promise”