“First, widening inequality is a very long-term trend, one that has been decades in the making. The degree of inequality we see today is primarily the result of deep structural changes in our economy that have taken place over many years, including globalization, technological progress, demographic trends, and institutional change in the labor market and elsewhere. By comparison to the influence of these long-term factors, the effects of monetary policy on inequality are almost certainly modest and transient.”
That’s what Blogger Ben Bernanke (who is of course distinct from PIMCO advisor Ben and Citadel co-conspirator Ben) had to say earlier this month [10] about the idea that the Fed’s post-crisis policies have contributed to income inequality in America.
The above-cited Bernankespeak can be translated as follows: poor people have been getting poorer for a long, long time, so sure, maybe the Fed contributed a little bit, but probably not a whole lot.
A common sense appraisal of QE tells a different story.
Deliberately inflating the assets most likely to be concentrated in the hands of the rich quite clearly increases the wealth divide and indeed, even the St. Louis Fed acknowledges [11] that the American Middle Class is effectively dying a slow death in the post-crisis world.
For proof, look no further than the latest data on US household income which shows that while the 0.001%, the 0.01%, the 0.1%, and the 1% have all nearly recovered their pre-crisis share of the national income, the bottom 50% of US filers' share is not only lower than it was in 2007, but is in fact lower than it was in the depths of the crisis:
[12]
[13]
More color from Bloomberg [14]:
The IRS recently released its latest income data on U.S. households. The numbers, which go through 2012, show that the top sliver of taxpayers recovered quickly from the recession. That's not what happened for everyone else.
U.S. household income is getting increasingly concentrated at the top. That was especially true in 2012, when there was a race to sell valuable assets before the top capital gains tax rate jumped to 23.8 percent from 15 percent.
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Perhaps Blogger Ben will help to explain the above — which seems to contradict his assessment — in a forthcoming Brookings post.