Wednesday, September 15, 2021

The Fed Is Bailing Out the Wealthy as Everyone Else Pays the Price

In any case, if the Fed were actually concerned about wealth and income inequality, the Fed would stop doing what it has done over the past decade.

In her new book, Engine of Inequality: The Fed and the Future of Wealth in America, Karen Petrou looks in detail at how Fed policy over the past decade-especially quantitative easing and ultralow interest rates-have benefited the wealthy while leaving most ordinary people behind.

As the head of Federal Financial Analytics Inc., she has provided research on the banking sector for more than thirty years, but in recent years she's become more focused on exposing and examining the unhealthy and destructive effects of Fed policy.

As Petrou notes, the "Perverse effect" of Fed policy has been to create "Acute inequality and resulting risks to both growth and financial stability."

Specifically, to do this, the Fed engages in quantitative easing, in which it purchases government bonds and financial assets.

Since the Great Recession began, the Fed has added more than $8 trillion in assets to its portfolio-which means trillions of dollars have poured into banks and nonbank financial institutions.

As a result [of QE], the Fed's ultra-low rates led to the yield-chasing that propelled financial markets ever higher even as regulated financial institutions changed their business model from taking deposits and making loans to average households to one betting on stocks and offering loans and other services to wealthy households, financial markets, and giant corporations.

https://mises.org/wire/fed-bailing-out-wealthy-everyone-else-pays-price 

No comments: