Curious to hear different opinions on this.
I would argue that the greatest impetus for wealth inequality over the past decade has been the Fed. The top 10% of Americans by wealth own 90% of the financial assets. Unelected officials printing trillions of dollars years after the financial crisis and using that money to buy financial assets (QE) effectively taxed everyone and lined the pockets of asset holders. And it was all the more clandestine because financial assets don’t show up in CPI.
Now we’re mired in a dangerous bout of inflation rendering the Fed essentially powerless to combat an impending recession. What was Yellen thinking in ‘14? And Powell in ‘19? I thought their justification seemed idiotic at the time (“inflation is only 1.2% as opposed to our 2% target”). Lots of things can precipitate low inflation (age demographics, technology, globalization) which are not all inherently bad. A surplus of aging Baby-Boomer savers relative to borrowers was likely one factor keeping inflation down — that’s merely the natural equilibria of supply and demand and in my opinion not a symptom of economic peril (and surely 1.2% inflation should not have been viable justification to flood our economy and markets with trillions of dollars of stimulus).
Inflation is an incredibly regressive tax, and I can’t help but blame the myopia of the Fed. Paul Volcker is turning in his grave.
Would definitely be interesting to see otherwise but hard to say without a counterfactual. It does seem however common sense that at least in the last decade you’re dead on about QE lining the pockets of the already rich asset holders. I wish there was a better comp for a large modern economy that has naturally occurring interest rates and just has central banks acting as a lender of last resort. If there is a country like this someone please enlightenment me as I haven’t spent as much time with macro as I should.
Money printer go brrrrrrrrrr
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