categoryMenu_new
 
  Home
  EXTRAORDINARY AH Teaching from Spiritual Hierarchy
  AbundantHope
  NEW READERS! Read Here First
  Supporting AH
  Leadership of AbundantHope
  Announcements
  Regional AH Sites
  Other Sites with AH material
  Contact Us
  Becoming A Messiah
  OUR PUBLIC FORUM IS OPEN TOO ALL
  Mission Ideas
  System Busting
  Cleric Letter/English
  Translations of Cleric Letter
  AH Member Writings
  Candace
  Ron
  Rosie
  Jess
  Brian's Poetry
  James
  Giuseppe
  Esteban
  Telepathic Messages
  Candace
  Jess Anthony
  Vince
  Leonette
  John
  Adam
  Bela
  Joyce
  Hazel
  Kibo
  Peter
  Rosie
  Johan
  Lucia
  Lucia G
  Rubens
  Shellee-Kim
  Ben
  Dorothea
  Solon
  Others
  Targeted Messages
  Hano
  Light Flower
  Changing The Face Of Religion
  - Phoenix Journals - PDF in German
  Candace on Religion
  Other Spiritual Pieces
  Gems from God Like Productions
  Spiritual Nuggets by the Masters
  Phoenix Journals
  Phoenix Journals - PDF
  Telepathic Messages PDF books
  Selections from the Urantia Book
  Illustrations For The Urantia Book
  CMGSN Pieces
  THE WAVE
  Environment/Science
  David Crayford and the ITC
  Health and Nutrition
  Podcasts, Radio Shows, Video by AH
 
  Political Information
  True US History
  Human/Animal Rights
  The Miracle That Is Me
  Education
  Resources
  911 Material
  Books - eBooks
  government email/phone #'s
  Self Reliance
  Video
  Websites
  Alternative News Sources
  Art and Music
  Foreign Sites
  Health and Healing
  Human/Animal Rights
  Scientific
  Spiritual
  Vegan Recipes
  Translated Material
  Dutch
  Gekanaliseerde berichten Jess
  Gekanaliseerde berichten Candace
  Gekanaliseerde berichten Anderen
  Artikelen/berichten
  French
  Canal Jess
  Par Candace
  Other Channels
  Articles
  German
  Telepathische Nachrichten (Candace)
  Telepathische Nachrichten (Jess)
  Telepathische Nachrichten (div.)
  AH Mitgliederbeiträge (Candace)
  AH Mitgliederbeiträge (Jess)
  Spirituelle Schätze
  Italian
  Translations - Candace
  Translations - Jess
  Translations - Others
  Portuguese
  by Candace
  By Jess
  By Others
  Spanish
  Anfitriones Divinos
  Bitácoras Fénix
  Creadores-de-Alas (WingMakers/Lyricus)
  Escritos de Candace
  Escritos de Otros
  Monjoronsón
  Telemensajes de Candace
  Telemensajes de Jess Anthony
  Telemensajes de Otros
  Chinese
  By Candace
  By Jess
  By Others
  Korean Translations
  Hungarian Translations
  Swedish Translations

Search
[an error occurred while processing this directive]
Political Information Last Updated: Oct 17, 2021 - 7:47:30 AM


The Fed Is Bailing Out The Wealthy As Everyone Else Pays The Price
By Ryan McMaken with comments by Ron
Oct 17, 2021 - 8:43:51 PM

Email this article
 Printer friendly page Share/Bookmark

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

 

The Federal reserve says that inequality is a problem. At the same, the Fed also pretends to have nothing to do with it.

Last September, for instance, Jerome Powell bemoaned the "relative stagnation of income" for people with lower incomes in the United States, but then claimed the Fed "doesn't have the tools" to address this issue. Instead, Powell, being the chairman of this ostensibly "independent" and "nonpolitical" central bank, called for the federal government to engage in fiscal policy efforts at income redistribution.

Powell, of course, is wrong, and he probably knows he's wrong. 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. It would end its ultralow interest rate policy and quantitative easing.

These policies have been at the center of the post-Great Recession economy, in which wealthy owners of stocks and real estate become ever more fabulously wealthy, even as ordinary people face stagnating employment, low economic growth, and a rising cost of living. This only accelerated during the economic crises of 2020, when endless Fed efforts to prop up the stock market meant that financial markets soared-and with them the portfolios of the wealthy-even as unemployment rose to record levels. Even Jim Cramer could see what was happening and declared Fed policy to be a part of "one of the greatest wealth transfers in history."

The ways that the Fed effects wealth transfers to the financial sector and the state-at the expense of everyone else-have long been the domain of Austrian school critics of central banks. That is, we've long noted in these pages how financial repression and so-called easy money have fueled vast riches for Wall Street, while leaving the middle classes and lower-income Americans behind.

But one need not rely on Austrian critics to get insight into the damage done by modern monetary policy.

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

Petrou is one of the more interesting and informative analysts examining the financial services sector. 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.

Petrou takes a different approach from the Austrians. She appears to have arrived at her conclusions from observing the trends and outcomes produced by Fed policy and then working backward into a theoretical framework. The data seems to have prompted her to ask why things have gone so badly after more than a decade of "unconventional" Fed policy. When it comes to identifying the problem, she's come to the right conclusions.

In any case, Petrou's book is important because it is the work of a Wall Street insider who no longer swallows the Fed's propaganda line that the Fed's interest rate manipulation-as Powell puts it-"supports the economy across a broad range of people."

The reality is something different. As Petrou notes, the "perverse effect" of Fed policy has been to create "acute inequality and resulting risks to both growth and financial stability."

The Mythical "Wealth Effect"

How did this happen?

Since the 2008 financial crisis and the Great Recession, the Federal Reserve has increasingly ratcheted up its efforts to increase liquidity and drive down interest rates. This is done as part of an effort to prop up the financial sector. It is assumed that a robust financial sector will grease the wheels of the economy overall and that the wealth in the financial sector will somehow trickle down to the rest of the economy via a theoretical "wealth effect."

Specifically, to do this, the Fed engages in quantitative easing, in which it purchases government bonds and financial assets. These assets are placed in the Fed's portfolio in exchange for dollars, which then flow into the financial sector. This raises the prices of financial assets while lowering yields and interest rates. It also increases the money supply.

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 Petrou notes, the effect of this policy has been extremely beneficial for the wealthy. Because so much money has been injected into the financial sector, stock prices have skyrocketed, and the prices of other assets-especially real estate-have soared.

Petrou shows that if we look at the data, however, we find that this economic boon hasn't done much for those who don't already have robust stock market portfolios and real estate assets. That is, the lower half of the US in terms of wealth and income. In fact, from 2001 to 2016, the median wealth of Americans in the bottom 80 percent of income earners has fallen.

According to Petrou's analysis, as stock prices and real estate prices have climbed, the economic prospects of many ordinary people have remained flat, or worse. She notes that from 2010 to 2020, employment growth was unimpressive and that during this period "Fed intervention led only to the slowest economic recovery in modern memory." She writes:

US economic growth was at best lackluster before COVID and the "full" employment about which the Fed was wont to brag was in fact less impressive when labor-participation rates and other factors are carefully considered.

On the eve of the 2020 financial collapse, the US's economic recovery could only be described as "fragile" and disappointing for anyone who wasn't in the top quintiles of earnings and wealth.

Soaring prices in stocks cannot be shown to have benefited those who don't own many stocks. Moreover, since the Great Recession, housing prices were largely flat among lower-priced homes in middle American markets. The benefits of asset price inflation in housing is felt far more in expensive coastal cities, where the wealthy own higher-priced real estate.

How Ultralow Rates Punish Ordinary Savers

In addition to asset price inflation is the problem of yield chasing, fueled by ultralow interest rates. This doesn't just leave low- and moderate-income families behind as asset price inflation does. Ultralow interest rates actually punish ordinary, conservative savers who lack the wealth or sophistication necessary to gain the benefits of high-risk yield chasing in the markets.

Banks and hedge fund managers have access to many tools to take on higher risk and seek out the corners of the market where higher interest offers a better yield. So, ultralow interest rates still leave Wall Street a variety of options. Most ordinary families don't have those options.

Petrou explains:

Ultra-low rates fundamentally eviscerated the ability of all but the wealthy to gain an economic toehold; instead they lead investors to drive up equity and other asset prices to achieve their return ... but average Americans hold little, if any, stock or investment instruments. Instead, they save what they can in bank accounts. The rates on these have been so low for so long that these thrifty, prudent households have in fact set themselves back with each dollar they save. Pension funds are just as hard-hit meaning not only that average Americans can't save for the future, but also that the instruments on which they count for additional security are unlikely to meet their needs."

Moreover, as banks and other lending institutions searched for higher yields, they lost their interest in lending to regular people:

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. Ultra-low rates failed to trickle down to low-, moderate-, and even middle-income households.

This is not due only to interest rate policy, however. Petrou also explains how banking regulations after the Great Recession have further driven banks away from lending to small businesses and ordinary borrowers. Federal regulation has further fueled a strengthening of megabanks, which are better able to meet regulatory benchmarks. Community banks, meanwhile-which serve smaller markets and small-time borrowers-are increasingly disappearing. Consequently, wealth continues to be centralized in Wall Street.

Petrou presents all of this information using evidence from countless quantitative studies from a variety of sources, including the Bank of International Settlements and even some member banks of the Federal Reserve System. Hundreds of footnotes enable the reader to follow these reports back to their sources and see for themselves what has happened: Fed policy has done wonders for billionaires and hedge fund managers. The data suggests others have clearly done less well.

Petrou's book certainly has its shortcomings. The book's monetary policy discussion doesn't begin until chapter 5, nearly sixty pages in. Before that, the reader must slog through an overly long discussion about the evils of inequality. Petrou's discussion on digital currency appears to be out of place, and her conclusions are not terribly convincing. And the final quarter of the book is a laundry list of recommended regulations and changes that amount to little more than tinkering with monetary policy. That is, this book is far too timid in calling for any real restraint on Fed power.

But as a resource for quantifying the results of the Fed's unconventional monetary policy, this book is valuable indeed. There is a well-researched and well-detailed hundred-page core in this book that shows in a dozen different ways what should be regarded as undeniable at this point: the Fed is a force for impoverishment, economic stagnation, and inequality.

[Ron: This type of analysis will probably assist those who seek to perceive some of the reasons why the Triodity and its global Alliance supporters have created and put in place the Quantum Financial System (QFS) which will eleminate the current global financial and banking systems and ensure that monetary manipulation and usurious fractional reserve banking can never again plunder and destroy human civilisation on this planet.

For some discussion of the real situation see eg: America's Debt Crisis Could Well Shake The World. Cut Off By Sanctions & Suspicion, Russia Should Ironically Find Itself Insulated http://abundanthope.net/pages/Political_Information_43/America-s-Debt-Crisis-Could-Well-Shake-The-World-Cut-Off-By-Sanctions-Suspicion-Russia-Should-Ironically-Find-Itself-Insulated.shtml

 

[Some colour fonts, bolding and comments in square brackets added.].

RELATED ARTICLES:

From the Notebook - The Unintended Consequences of COVID-9/11 http://abundanthope.net/pages/Political_Information_43/From-the-Notebook-The-Unintended-Consequences-of-COVID-9-11.shtml

How Interlinked Corporations Rule The World http://abundanthope.net/pages/Political_Information_43/How-Interlinked-Corporations-Rule-The-World.shtml

The Hidden-in-Plain-Sight Mechanism of the Super-Wealthy: Money-Laundering 2.0. See: http://abundanthope.net/pages/Political_Information_43/The-Hidden-in-Plain-Sight-Mechanism-of-the-Super-Wealthy-Money-Laundering-2-0.shtml

Leaked IRS Data Show America's Super-Rich Pay "True Tax" Of 3.4% - http://abundanthope.net/pages/Political_Information_43/Leaked-IRS-Data-Show-America-s-Super-Rich-Pay-True-Tax-Of-3-4.shtml

Corporate Transnational Warlord Pirates Are On the Run- Vanguard - http://abundanthope.net/pages/True_US_History_108/Corporate-Transnational-Warlord-Pirates-Are-On-the-Run--Vanguard.shtml

The Right to Bodily Integrity: Nobody Wins and We All Lose in the COVID-19 Showdown http://abundanthope.net/pages/Human_Animal_Rights_104/The-Right-to-Bodily-Integrity-Nobody-Wins-and-We-All-Lose-in-the-COVID-19-Showdown.shtml

Money From Home: Richest US Families Keep Wealth To Themselves Instead of Generating More, study reveals - http://abundanthope.net/pages/Political_Information_43/Money-From-Home-Richest-US-Families-Keep-Wealth-To-Themselves-Instead-of-Generating-More-study-reveals.shtml

Cultural Marxism: Managing The Ant Farm http://abundanthope.net/pages/Political_Information_43/Cultural-Marxism-Managing-The-Ant-Farm.shtml

Trump Takes Control of the Fed - Leads the way for other countries to follow - Michael Tellinger - http://abundanthope.net/pages/Political_Information_43/Trump-Takes-Control-of-the-Fed--Leads-the-way-for-other-countries-to-follow---Michael-Tellinger.shtml

WE ARE NOW IN THE PROCESS OF DISMANTLING THE ROTHSCHILD BANKING SYSTEM, TARGET LOCKED: JIM WILLIE - http://abundanthope.net/pages/Political_Information_43/WE-ARE-NOW-IN-THE-PROCESS-OF-DISMANTLING-THE-ROTHSCHILD-BANKING-SYSTEM-TARGET-LOCKED-JIM-WILLIE.shtml

DAVID CRAYFORD ---------- IT'S TIME THAT SOMEONE STARTED KICKING ASS SO THAT CHANGES TO THE CURRENT FINANCIAL SYSTEM CAN BE MADE TO BENEFIT EVERYONE, NOT THE MINORITY - http://abundanthope.net/pages/Whistleblower_and_OITC_114/DAVID-CRAYFORD------------IT-S-TIME-THAT-SOMEONE-STARTED-KICKING-ASS-SO-THAT-CHANGES-TO-THE-CURRENT-FINANCIAL-SYSTEM-CAN-BE-MADE-TO-BENEFIT-EVERYONE-NOT-THE-MINORITY.shtml

OPTICS ARE IMPORTANT, ITS TIME, THE ECONOMY IS COMING BACK ONLINE EPISODE 2173A - http://abundanthope.net/pages/True_US_History_108/OPTICS-ARE-IMPORTANT-ITS-TIME-THE-ECONOMY-IS-COMING-BACK-ONLINE-EPISODE-2173A.shtml

WHAT A GOVERNMENT CAN DO WITH ITS OWN BANK: THE REMARKABLE MODEL OF THE COMMONWEALTH BANK OF AUSTRALIA - http://abundanthope.net/pages/Political_Information_43/WHAT-A-GOVERNMENT-CAN-DO-WITH-ITS-OWN-BANK-THE-REMARKABLE-MODEL-OF-THE-COMMONWEALTH-BANK-OF-AUSTRALIA.shtml

Stephanie Kelton: The Public Purse - http://abundanthope.net/pages/Political_Information_43/Stephanie-Kelton-The-Public-Purse.shtml

Crushing the States, Saving the Banks: The Fed's Generous New Rules - http://abundanthope.net/pages/True_US_History_108/Crushing-the-States-Saving-the-Banks-The-Fed-s-Generous-New-Rules.shtml

How Interlinked Corporations Rule The World - http://abundanthope.net/pages/Political_Information_43/How-Interlinked-Corporations-Rule-The-World.shtml

Bank of England Secret Bail Out of Big Business - over £100bn Committed in 3 Weeks - http://abundanthope.net/pages/Political_Information_43/Bank-of-England-secret-bail-out-of-big-Business-over-100bn-Committed-in-3-Weeks.shtml

The USA Isn't a Country, It's a Corporation! - http://abundanthope.net/pages/True_US_History_108/The-USA-Isn-t-a-Country-It-s-a-Corporation.shtml

The Hidden-in-Plain-Sight Mechanism of the Super-Wealthy: Money-Laundering 2.0. See: http://abundanthope.net/pages/Political_Information_43/The-Hidden-in-Plain-Sight-Mechanism-of-the-Super-Wealthy-Money-Laundering-2-0.shtml

Corporate Transnational Warlord Pirates Are On the Run- Vanguard - http://abundanthope.net/pages/True_US_History_108/Corporate-Transnational-Warlord-Pirates-Are-On-the-Run--Vanguard.shtml

The corporate stranglehold on food and agriculture. - http://abundanthope.net/pages/Health_and_Nutrition_37/The-corporate-stranglehold-on-food-and-agriculture.shtml

How Billionaires Become Billionaires -- http://abundanthope.net/pages/Political_Information_43/How-Billionaires-Become-Billionaires.shtml

Which Companies Have The Most Tax Havens? - http://abundanthope.net/pages/Political_Information_43/Which-Companies-Have-The-Most-Tax-Havens.shtml

How Did CEO Pay Get to 500 Times the Wages of Ordinary Workers? - http://abundanthope.net/pages/Human_Animal_Rights_104/How-did-CEO-Pay-Get-to-500-Times-the-Wages-of-Ordinary-Workers.shtml

Trillion-dollar-valued Amazon Pays $0 in Income Taxes for 2018, Gets Multi-million Refund - http://abundanthope.net/pages/Political_Information_43/Trillion-dollar-valued-Amazon-Pays-0-in-Income-Taxes-for-2018-Gets-Multi-million-Refund.shtml

The Permanent Unemployment & Underemployment Economy - http://abundanthope.net/pages/Political_Information_43/The-Permanent-Unemployment-Underemployment-Economy.shtml

Time To Separate Capitalism From Finance - http://abundanthope.net/pages/Political_Information_43/Time-To-Separate-Capitalism-From-Finance.shtml

How Inflation Destroys Civilization - http://abundanthope.net/pages/Political_Information_43/How-Inflation-Destroys-Civilization.shtml

Can We Do Without Money ? http://abundanthope.net/pages/Political_Information_43/Can-We-Do-Without-Money.shtml

A Universal Basic Income Is Essential and Will Work http://abundanthope.net/pages/True_US_History_108/A-Universal-Basic-Income-Is-Essential-and-Will-Work.shtml

Bitcoin is a Ponzi Scheme -http://abundanthope.net/pages/Political_Information_43/Bitcoin-is-a-Ponzi-Scheme.shtml

Anatomy Of A Fiat Currency Collapse - http://abundanthope.net/pages/True_US_History_108/Anatomy-Of-A-Fiat-Currency-Collapse.shtml

The Mystery of the One Bank: its Owners? - Jeff NielsonT. See: http://abundanthope.net/pages/Political_Information_43/The-Mystery-of-the-One-Bank-its-Owners---Jeff-Nielson_printer.shtml

Paper Money Versus The Gold Standard - http://abundanthope.net/pages/True_US_History_108/Paper-Money-Versus-The-Gold-Standard.shtml

Stephanie Kelton: The Public Purse - http://abundanthope.net/pages/Political_Information_43/Stephanie-Kelton-The-Public-Purse.shtml

 




All writings by members of AbundantHope are copyrighted by
©2005-2021 AbundantHope - All rights reserved

Detailed explanation of AbundantHope's Copyrights are found here


Top of Page

Political Information
Latest Headlines
Democrat Senator Threatens Supreme Court With ‘revolution’ if Roe v. Wade is Overturned
Brisbane Beats The Heat To Rally For FREEDOM
Russia Not Building ‘fortress walls’ But Simply Seeking to Increase Sovereignty – Putin
Four Ways The Ghislaine Maxwell Trial Is Already Rigged
The Most Striking Fact in Robert F. Kennedy, Jr.’s New Book
Canada Is Turning Feminists Into Criminals
New Law Allows For Warrantless Spying On Australians – where next?
Secretary of Defense Sends out Memo to Force Full Vaccination of All Members of the Armed Forces Under DoD Authority
Pentagon Orders New Probe into Syria Airstrike That Killed Dozens of Civilians
US Officials Confirm Israel Behind Cyberattack On Iranian Gas Stations
Dubbo - Old World in the Outback
COVID-19 vaccine II
Israel Authorizes Spy Agency To Access Private Cell Phone Data To Track Omicron Variant
Riccardo Bosi !! This guy!! Refreshing honesty and he's a politician!! Legend!!
BREAKING: Federal Judge Blocks Vaccine Mandate Nationwide – Protects Health Care Workers Across America
CNBC Pundit Calls Unvaxxed People “Psychotic”, Demands U.S. Military Hunt Them Down, Force Vaccine or Force Quarantine
Exposing The ‘indefensible’ Lies And Corruption Of Roe v. Wade Ahead of The Mississippi Case
Rittenhouse shooting victim confronted with video showing him pointing gun at defendant
Russia Comments On US ‘religious freedom’ Claims
Big Pharma Hunts Down Dissenting Doctors