Why We Need Baby Warbucks: Equities as a Pathway to Equality

By Karen Petrou

There is an extensive literature on the “unbanked.”  But what of those one might call the “unsecured?”  In previous blog posts, we have pondered “equality banking” and “equality insurance.”  Now, we turn to equality investing, doing so not just because savings at ultra-low interest rates has become the road to ruin, but also because several retail brokers have redesigned entry-level investing with considerable equality upside.  Although caution is always warranted when products are aimed at inexperienced investors, “fractional share” options and no-commission fees could make a meaningful difference for millennial and lower-income households hoping to have enough put aside over time to own a home, ensure a secure retirement, and protect their families from the unexpected. Continue reading “Why We Need Baby Warbucks: Equities as a Pathway to Equality”

“People’s QE” and Noblesse Oblige

By Karen Petrou

As the chimera of the post-crisis recovery fades and central bankers find themselves powerless to reverse recession, “people’s quantitative easing” is gaining attention as a tool a growing number of central bankers fancy gives them a new way to wreak their beneficent will.  People’s QE – also known more colorfully as “helicopter money” – means that, despairing of fiscal-policy remedies, central banks print money and then either just give it to the people or invest it in assets they or their bosses think best for equalizing, trade-deficit dropping, climate-restoring, or other all-to-the-good economic growth.  However, it’s not just central bankers casting longing eyes at the ability of central banks to print money – officials ranging from those in the Trump Administration to the Democratic Socialist candidate for President see it as a new way to do what they think are the voter’s bidding without raising the deficit.  This is really, really central banking, but for all its power, it’s very problematic.  QE so far has done little to spur sustained recovery and much to make the U.S. even more unequal.  There’s no reason to believe a people’s QE will be any better. Continue reading ““People’s QE” and Noblesse Oblige”

America’s Stalwart Savers Get the Sucker Punch

By Karen Petrou

Recently, I had an op-ed in the Financial Times arguing that negative rates make it even harder for moderate-income households to accumulate wealth.  The reason, I said, is simple:  when savings-deposit or similar rates are ultra-low or even negative in real terms, households that save get poorer and poorer both on their own and in comparison to wealthier households with more sophisticated financial-asset investments.  This might seem irrefutable, but the article generated hundreds of comments.  Many were positive but more than a few countered that lower-income households don’t have savings so savings rates don’t exacerbate economic inequality.  To my mind, this is like saying that poor people are already thin so the fact that they don’t have enough food doesn’t matter. Continue reading “America’s Stalwart Savers Get the Sucker Punch”

Do Credit Unions Give Credit Where Equality is Due?

By Karen Petrou

U.S. credit unions in 2019 are far from the proverbial church-basement financial clubs – now, credit unions are a $1.5 trillion sector of the U.S. financial industry.  Given the extent of the U.S. equality crisis, $1.5 trillion dedicated to affordable, sustainable financing would not only adhere to the 1934 statutory mission that binds credit unions to this day, but also make a heck of a difference for low-and-moderate income households.  Do credit unions in fact adhere to their mission and thus earn the sweeping tax and regulatory benefits taxpayers provide to encourage them to do so?  A new Federal Financial Analytics study* finds that credit unions sadly fall far short. Continue reading “Do Credit Unions Give Credit Where Equality is Due?”

The Good, the Bad, and the Ugly in American Well-Being

By Karen Petrou and Matthew Shaw

Yesterday, FRB Vice Chairman Clarida said that the U.S. economy is in “in a good place.”  However, The Fed’s new study of American economic “well-being” shows that huge swaths of the United States are struggling harder than ever before to make ends meet.  All but the most affluent Americans asked about how well they’re doing don’t feel anywhere near that good about it.  Combine this with new data on the evaporating American middle class and an ugly picture quickly merges.  In it, the prosperity in which the Fed takes such comfort rests thinly atop millions – indeed a hundred plus million – of Americans who are barely getting by at the height of the business cycle following a record-breaking “recovery.”  No wonder that so many Americans remain so angry about their economic prospects and why political polarization is sure to define the 2020 election at least as much as it determined 2016’s outcome.

Continue reading “The Good, the Bad, and the Ugly in American Well-Being”