By Karen Petrou
As 2018 drew to a close, the Federal Reserve Board and the Financial Stability Oversight Council each pronounced financial-stability risk to be comfortingly “moderate,” much as Ben Bernanke and Hank Paulson did in August of 2008. It remains to be seen if market turmoil just days after is more than a bad blip, but there’s a still more worrisome financial-crisis risk lurking beneath volatile financial markets: U.S. economic inequality. Here, we show how current, acute inequality makes 2019 particularly perilous even if markets stabilize, President Trump eschews Twitter, the federal government begins anew, and all seems somehow otherwise right with the world. Continue reading “Economic Inequality, Financial Crises, and 2019” →
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” →