We all know the narrative: Inequality worsened materially as a result of the monetary policy response to the global financial crisis.

To be sure, the Fed had little choice but to do what it did. Or some version of what it did. The situation was quite dire in September and October of 2008. The world very nearly ended. I remember it vividly.

The problem for Main Street (in addition to the annoying imperative of bailing out Wall Street) was that Ben Bernanke appeared to underestimate the efficiency of the transmission channel between monetary largesse and financial assets while overestimating the extent to which the so-called “wealth effect” would precipitate better outcomes in the real economy.

Remember: The benefits of financial asset appreciation accrue exponentially because the distribution is unequal in the first instance. Those assets are overwhelmingly concentrated in the hands of the rich, so when they (the assets) appreciate, the rich get much, much richer, and the distribution becomes even more skewed.

The difference between monetary accommodation post-GFC and post-pandemic was the pairing with aggressive fiscal stimulus and government transfers during the public health crisis. Yes, there was a massive bubble in…. well, everything, by November of 2021. And we got runaway inflation for our trouble (I’ll argue excessive demand was an aggravating factor in that regard, not the proximate cause, which was supply disruptions and war). But the outcome was arguably better for Main Street, where wages rose and inequality actually improved at the margins.

Fast forward to 2024 and what do we see? Ebbing inflation and central banks poised to cut rates and cease balance sheet runoff. So, should we expect inequality to worsen anew even as the slowdown in inflation, when juxtaposed with the legacy of hot wage growth, spells better real pay gains for workers? Maybe.

“Liquidity = Inequality,” BofA’s Michael Hartnett wrote, in the latest installment of his popular weekly “Flow Show” series, noting that global central bank liquidity, which “surged from $6 trillion in 2008 to $29 trillion in February of 2022” before falling by $5 trillion through October of last year, “has since risen $300 billion on higher Chinese FX reserves.

The “big picture,” Hartnett said, is that the 2022-2023 QT era is over, and central bank liquidity is “flipping to Wall Street positive” in 2024.

Markets are “front-running central bank rate cuts and liquidity via the 2010s playbook of ‘bubbles for the few, bears for the many,'” he went on, flagging the return of the “big get bigger/small get smaller” dynamic in equities, “as investors favor companies with monopolistic ability to set prices, protect margins and market share and dictate future competition.” (Note that Lina Khan has A.I. deals in her crosshairs now.)

That could mean that inequality, at least on one simple metric, is poised to rise.

As the figure, from BofA, shows, the value of private sector financial assets (which Hartnett calls “Wall Street”) relative to the value of the economy (“Main Street”) looks set to move higher again.

That ratio moved “from 4.3x in 2009 to 6.3x by 2021 [then] dropped to a low of 5.4x in 2023,” Hartnett remarked. It was “back up to 5.6x in Q4.”

Of course, rising stock prices and the Fed pivot were in part responsible for an improvement in consumer sentiment last quarter, and despite big wage gains on Main Street and robust nominal growth during Joe Biden’s first three years in office, consumer moods were generally depressed. So, with a caveat to account for the partisan divide in sentiment surveys, Main Street was depressed in the face of receding inequality and the mood started to brighten just as inequality, on one measure anyway, began to worsen anew.

It’d be ironic indeed if ending the so-called “vibecession” on Main Street entails the deliberate restoration of the dynamics which benefited, almost exclusively, Wall Street since the GFC.