By Matthew Shaw and Karen Petrou
Every three years, the Federal Reserve releases a unique, illuminating data set, the Survey of Consumer Finances (SCF). The most recent report covering 2016 to 2019 comes at a time of acute political risk for the U.S. central bank due to growing demands for a third, “racial-equity” mandate and heightened recognition of the inequality impact of post-crisis monetary policy. Perhaps for this reason, the Fed’s qualitative release and much subsequent media coverage highlighted what the Fed described as meaningful reductions in both wealth and income inequality. Would it were so – percentages sometimes work in the Fed’s favor, but real dollars in people’s pockets, or the acute lack thereof, don’t.
Continue reading “The Dollars That Make a Difference: Results of the New Survey of Consumer Finances”
By Karen Petrou
- Pre-COVID inequality evidenced itself instantly in post-COVID consumer-finance extremis.
- A unique construct of ground-up recovery policies is an essential, urgent response.
- Regulatory revisions would help and long-overdue equitable liquidity facilities would do still more.
- New public guarantees are critical.
Ever since the U.S. economy crept out of recession, the Fed has represented its slow, inequitable recovery as a “good place.” Its own 2018 economic well-being survey contradicted this and the latest data released on May 14 are no better before COVID came and a lot worse thereafter. These data make it still more clear that the Fed must quickly reorient its trickle-down rescues to move money starting at ground level, but even that won’t be sufficient given the magnitude of COVID’s economic impact. The combination of macroeconomic harm and financial-system hurt also requires a reset in which new public guarantees for prudent private financing fully recognized by new rules play a major part. Continue reading “Bad Things about the Good Place and How to Pretty It Back Up”
By Karen Petrou and Matthew Shaw
Shortly before Thanksgiving, a new study documented that U.S. life expectancy since 2010 has taken a sharp turn for the worse for younger Americans regardless of race, gender, or education. We knew that opioids were devastating, but this study confirmed others showing also that the overall reversal in U.S. life expectancy is due to more profound and mysterious afflictions. Doctors are flummoxed by why U.S. mortality is so much higher than that in other advanced countries, where life expectancy continues to increase for younger citizens, concluding that something endemic is going on behind the epidemic of “diseases of despair.” The latest inequality data demonstrate yet again that the economic “good place” that comforts Fed policy-makers is to be found only in the 100th floor penthouses that are the eyries of the one percent. We thought the data more than dispiriting when we analyzed the Fed’s first distributional financial account; now, we find them devastating, not to mention evil omens of a polarized, angry electorate heading to the 2020 polls. Continue reading “Dark Corners in “Good Places””
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”