Why a Racial-Equity Mandate Isn’t Enough: Action for Inclusive Financial Policy

By Karen Petrou

  • The lack of racial equity in U.S. monetary and regulatory policy is only part of the problem.  Inclusive policy must reach all groups – including persons with disabilities – now overlooked by the Fed and thus left behind by the U.S. economy.
  • The Fed’s monetary policy mandate in current law is already inclusive, but unmet and unenforced.  Fixing that by legislation may focus the Fed’s attention with better data, but data aren’t enough.
  • Inclusive financial policy effectively reaches all under-served groups via equality-focused financial regulation and ground-up – not trickle-down monetary policy.  The Fed is already a fiscal agent via its huge asset purchases, but this is the opposite of inclusive policy due to its direct and unequal wealth impact.  Inclusive policy realigns monetary and regulatory accountability, but does not replace it with a still greater fiscal presence.
Continue reading “Why a Racial-Equity Mandate Isn’t Enough: Action for Inclusive Financial Policy”

If You Liked the Last Crisis ….

By Karen Petrou

  • New data show that the COVID pandemic is creating even more income inequality than the great financial crisis, which is saying something.
  • Wealth inequality is already climbing to unprecedented heights due to Fed intervention and resulting market gains.
  • Absent fiscal policy that reduces income inequality and a change in financial policy benefiting wealth equality, post-pandemic inequality could be still more toxic, exacerbating longstanding challenges to macroeconomic growth and increasing financial-crisis risk.
Continue reading “If You Liked the Last Crisis ….”

Trying to Get By While Black

By Karen Petrou

  • African-Americans were better off before the civil-rights era began than they were in mid-2019.
  • Truly huge disparities lie between white and black Americans in terms of income, wealth, and inter-generational mobility.
  • And that was before COVID eviscerated low-income households of color from both a health and economic point of view.
  • It’s past time for equality-focused financial policy, starting first with Equality Banks.

Continue reading “Trying to Get By While Black”

Bad Things about the Good Place and How to Pretty It Back Up

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”

Inequality Rising

By Karen Petrou

As the COVID crisis continues, some have speculated that wealth inequality will drop because it did in the 1400s during the Black Death.  However, this cure is not only of course considerably worse than the disease, but it’s also no cure.  Economic inequality is a cumulative process – the worse off you are, the worse off you get unless something positive reverses this compound effect.  Conversely, the better off, the still more comfortable unless something comes along to redistribute your gains, however well or ill gotten.  Given how unequal the U.S. was before COVID, it will surely get only more so now, especially if the Fed stays the course with trillions for financial markets and pennies for everyone else. Continue reading “Inequality Rising”