"Yes, US policy is one step improved from the post-2009 bank-centric errors, but it is still a long way from being a framework that one could say with confidence will lead to a real, sustainable recovery", Rabobank's Michael Every writes, in a new note which strikes at the heart of something I've struggled to communicate over the course of the current crisis.
The investing public seems to realize that, acting on its own, extraordinarily accommodative monetary policy invariably leads to asset price inflation, and that asset price inflation exacerbates inequality.
That's pretty straightforward. Financial assets are concentrated disproportionately in the hands of the wealthy. When those assets appreciate, the benefits accrue exponentially. Over time, that leads to higher levels of concentration.
A smaller set of investors understands this on a more nuanced level -- they grasp a deeper "why", as it were.
This is very often left out (purposefully in some cases) of commentary criticizing the Fed. It's not that the "wealth effect" doesn't work. When you drive up the prices of financial assets, some of the benefits do accrue to middle-class families (they own some stocks, after all)
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