Yes, Fed Policy Exacerbates Inequality. But It Doesn’t Have To Be That Way.

Yes, Fed Policy Exacerbates Inequality. But It Doesn’t Have To Be That Way.

"It is impossible to bail out Main Street without bailing out Wall Street even more", Nordea's Andreas Steno Larsen writes, in the latest edition of his FX and rates weekly series, released right on schedule Sunday, despite his being busy getting married this weekend (congrats). "Sad but true", he added, describing an unfortunate state of affairs in which monetary policy acting on its own (i.e., without complimentary fiscal stimulus) is virtually destined to increase inequality. I wanted to to
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8 thoughts on “Yes, Fed Policy Exacerbates Inequality. But It Doesn’t Have To Be That Way.

  1. We will monetize debt! sounds like a very catchy slogan for 2020 elections. Not!
    Most people don’t even know where money comes from and don’t even care.

    1. Good point. I think while it is obvious to a few, and this report does lots to educate the extremely curious, it may never be explainable to the masses. If anyone can figure out how to do that it can become a realistic platform. Maybe incorrectly I see this as MMT which the wealthy are already working to gin up zingers to stop. Easier to gin up zingers than to create real education.

  2. ” There are limits to how long the Fed can prop up equity markets.”…….I agree …but are we dealing with objective or subjective criteria when we say/assume something like that…??? Seriously , it is an important issue…

  3. Really appreciated this post. In the short term it’s nice to see the IRA go up and pension funds remain a little less insolvent, but in the long term this issue destroys the country. The bottom 90% feels a genuine pinch as asset inflation jacks up housing prices. So it’s not just a matter of relative disparity (e.g., I was feeling great until you cruised by in your BMW). Housing costs have mirrored financial assets since the Fed started their easing programs, and that has been lethal to regular folks’ budgets.

  4. Riots, looting by the elites of our riches, and the sources of racial injustice, don’t mean anything to the eiltes of a country that has obviously lost it’s way. Fools. All eyes now on the “solvency crisis.” As the stock market is a fabled machine that brings future events into the present, I, for one, can’t wait to hear how all the businesses and jobs lost to bankruptiy are better than “concensus estimates,” resulting in untold riches for “investors” in $SPX.

    Barring the U.S. losing a war, or a cataclysm, there is not going to be reform. it’s going to be like this for a while. More families will become “financially irrelevant.” 30-year mortgages at 3.05%, Zero percent out to the the new 20-year Treasury, and real economic growth of 1.2% if we’re lucky. It was ours to lose.

    The money printer goes Brrrrr.

  5. A great post Mr. H. And in pictures too, so that even the financially uneducated masses (including myself), can understand the situation and hopefully seek a solution by voting for someone who will enact change, like disallowing deductibility of lobbying expenses, admitting publically to the cause and inequality of the asset bubble and direct debt financing. The last one I am not crazy about, but in this case, it has to be done.

  6. Our wealth disparity is the result of free market capitalism. It is imperfect and by its very nature there are winners and losers. There are always more Sheep than sheep herders, and more herders than land owners. Trying to alleviate this disparity is called communism. Last I checked this failed miserably in Russia, and China is the oxymoronic free market dictatorship where wealth disparity between winners and losers is even greater than in the US, the government decides who gets rich. Did someone in US government give Zuckerberg permission to create Facebook? No, and I don’t want an environment where the government gets to decide who the winners and losers are.

    I don’t know the solution but I don’t trust the government to get this right. It is a classic agency issue where the government perpetuating itself becomes the priority over putting constituents first. Focusing on government redistribution only creates a more bloat and A dependency On central government for support That is antithetical to capitalism. MMT and direct payments to constituents is a slippery slope and won’t solve the wealth disparity issue anyway. Only make it a bit more palatable to the masses. E.G., Better to encourage companies to share profits with employees as an incentive to work. Or pay people to clean up city streets.

    I want the government to support small businesses, support creativity, Support new business formation, To provide the foundation that a thriving capitalistic society needs.

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