Tuesday, April 27, 2021

The Fed is worsening inequality

This is actually the latest manifestation of what's been going on for a long time. Especially the part about interest rates.
Ever since the COVID-19 pandemic struck, the Federal Reserve has gotten plenty of kudos for moves that have helped stabilize the economy, kept house prices from tanking and supported the stock market. But those successes have obscured another effect: the inadvertent impact the Fed’s ultra-low interest rates and bond-buying sprees are having on economic inequality.

Longstanding inequality in the U.S. has been exacerbated by the Fed’s role in touching off a multi-trillion-dollar boom in stock markets — and stock ownership is heavily skewed toward the wealthiest Americans...

“Inequality is a cumulative process,” said Karen Petrou, author of “The Engine of Inequality: The Fed and the Future of Wealth in America” and managing partner of the Washington-based consulting firm Federal Financial Analytics. “The richer you are, the richer you get, and the poorer you are, the poorer you get, unless something puts that engine in reverse,” she said. “That engine is driven not by fate or by untouchable phenomena such as demographics but most importantly by policy decisions.” - ProPublica

2 comments:

  1. Side comment ... watch what happens with property taxes as a result of rising home sale prices.

    I fear a shift in burden to senior citizens who have stayed in their communities for decades and now find their home's assessed values increasing because others are selling their homes. "all boats DO NOT rise with the tide" just because a neighbor sold an updated home in today's market ... but the remaining homeowner's share of the "local government pie" just got bigger. A friend just told me that her neighbor just sold their house of over $100,000 more than the assessed value ... and in my stable neighborhood, land values have gone up $15,000 plus assessed values on the homestead.
    Add to that the increase in local government spending ... I see people living on a fixed income having problems.

    I say it all the time, there are Two Americas

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  2. Yes, it's a big problem, though the MN property tax refund program can often help. Too many Minnesotans still apparently don't know about that.

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