By Karen Petrou
- Although a new BIS report finally takes seriously the proposition that central banks may inadvertently increase economic inequality, it goes on to dismiss it because any inequality impact is said to be short-lived thanks to fiscal policy.
- However, neither short-lived inequality nor effective fiscal clean-up is substantiated by data in the U.S.
- But, while the BIS at least acknowledges some inequality impact, the Federal Reserve is obdurate that it doesn’t make economic inequality even a little bit worse. This means prolonged policy with still more profound anti-equality impact.
It is the purpose of this blog and my new book to show not just that monetary and regulatory policy may increase economic inequality, but also that the Fed’s policies since at least 2010 in fact did so. This isn’t an academic exercise – it’s an effort to show as analytically as possible how monetary policy exacerbates inequality so monetary policy alters course before inequality’s systemic, political, and human cost grow still higher. However, disciplined analytics that power up effective advocacy must be open to correction. This blog post thus looks first at a new, if halting, acknowledgement of at least some inequality impact from the Bank for International Settlements and then the Fed’s still-stout denial that it has any responsibility for the growing U.S. wealth and income divide.
Continue reading “The Central-Bank Inequality Excuse and Why It’s No Exoneration”
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 and Matthew Shaw
Janet Yellen, Ben Bernanke, and Jerome Powell have each bemoaned U.S. economic inequality and then asserted that it’s everyone else’s fault. On the blog and in our speeches, we counter that post-crisis monetary and regulatory policy had an unintended but nonetheless dramatic and destructive impact on the income and wealth divides. In doing so, we often point to just how much worse and how much faster inequality became as post-crisis policy took hold. Demographics, technology, and trade policy didn’t change anywhere near that much that fast. Now, a new study from the Federal Reserve Bank of Minneapolis takes the story forward with a trove of data evaluating U.S. economic inequality from 1949 through 2016. For all the recovery and employment the Fed cites in its equality defense, these data tell a far different tale. Continue reading “It’s Worse Than You Thought”
By Karen Shaw Petrou and Basil N. Petrou
On June 20, FRB Chairman Powell said, “Nine years into an expansion that has sometimes proceeded slowly, the U.S. economy is performing very well.” Although Mr. Powell noted low labor participation, puzzling inflation, and problematic wage growth, he said that all will come right as long as the Fed stays the course. No mention was made of unprecedented U.S. income and wealth inequality or of a housing market serving mostly the oldest, wealthiest, and most coastal among us. Too bad – inequality and the impediments to effective monetary-policy transmission it erects are among the most important reasons that the nine years Mr. Powell cites have seen the slowest recovery in decades in concert with new threats to financial stability. Continue reading “Disquiet on the Home Front”