Wondering Why Trump Loves Tariffs? Check Out Globalization’s Inequality Impact

By Karen Shaw Petrou

When the IMF was established at Bretton Woods in 1945, it was key to the post-war creation of a globalized international economic and financial system.  That was then.  Now, the Fund has released a ground-breaking paper finding that globalization not only does not boost growth in advanced economies, but also appears to worsen income inequality.  The paper does not go on to push for protectionism – blasphemy at the Fund and not borne out for trade in goods by the detailed findings of this study.  It does, though, show that the more globalized capital flows grow in concert with more imports, the harder it is for low-skilled workers to get ahead.  No wonder the Rust Belt’s as angry as it said it was in 2016. Continue reading “Wondering Why Trump Loves Tariffs? Check Out Globalization’s Inequality Impact”

How to Turn CRA into a Positive Force for Economic Equality

By Karen Shaw Petrou

On January 10, the Wall Street Journal confirmed that Trump Administration regulators plan to advance the reforms to the Community Reinvestment Act (CRA) first outlined in a 2017 Treasury Department report.  The CRA dates backs to an era when progressive Democrats controlled federal financial regulation and is now a hallowed artifact of policy that progressives believe advances economic equality.  Community advocates and many Democrats will thus cry foul as this Trump Administration initiative begins.  Are they right?  Does the CRA really advance economic equality?  Continue reading “How to Turn CRA into a Positive Force for Economic Equality”

Income, Wealth, and Well-Being

By Karen Shaw Petrou

In prior blog posts, we’ve looked at recent data on income and wealth to assess U.S. economic equality and the policies that drive it.  Depressed that we are, we soldier on and here turn to a new Federal Reserve staff study that puts these two critical indicators together with a third – consumption – in an impressive effort to judge economic equality not just by separate distribution tables, but also by a “multi-dimensional” approach.  This looks not only at who has how much income or wealth, but also at who has the most of each along with the greatest amount of consumption.  Combining all three measures of prosperity turns out to show that a small group of people who have the most income and wealth control a lot more economic resources than even prior measures of inequality revealed.  Continue reading “Income, Wealth, and Well-Being”

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”