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
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”
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”
By Karen Shaw Petrou
On Tuesday, FRB Chairman Powell delivered a strongly-positive statement on the state of the U.S. economy. Citing factors such as recent wage growth and employment, Mr. Powell is far more worried about keeping the good times going than about how inequitably the good times deliver the goodies across the gaping U.S. income and wealth divide. This is setting monetary and regulatory policy the same way a diver looking only at a calm, blue surface jumps into a lake and breaks his neck. Continue reading “Still Economic Waters Hide Lurking Danger”