NEOLIBERAL POLICIES THE MAIN PROBLEM, ADMITTED by FED
Submitted by Tyler Durden on
06/10/2015
Once again, the Federal Reserve proves that it’s the last
one to know everything that we knew already. Today’s
stunning announcement: The Philadelphia Fed admits they (“may
have”) made the wealthy wealthier and Main Street poorer.
Oops. Sorry America.
The Philly Fed insists
that “redistributing wealth” to the wealthy isn’t the main idea,
but just a potential side effect of stimulus that they
can’t do much about.
“Monetary policy currently
implemented by the Federal Reserve and other major central banks is not
intended to benefit one segment of the population at the expense of another by
redistributing income and wealth,” …
“However, it is probably impossible
to avoid the redistributive consequences of monetary policy”.
We’re shocked. Shocked, we tell you. It
turns out that handing out free money, buying worthless assets at
face value and allowing a small cabal of private banks the sole right to access
your magic free-money window, “may” have given some financial advantages to “one
segment of the population”. But that’s just a side effect of
saving the “economy”.
Of course, it’s not just the bankers. The 1% also
happen to hold vastly more financial assets than the lower 99% — so they may
directly benefit from financial asset-inflating monetary policy.
And low income households which live paycheck-to-paycheck
are far more exposed to “inflation-sensitive cash”.
It’s great to see the Federal Reserve finally state this
possibility publicly, unfortunately it doesn’t mean they’re about
to change their minds. In the eyes of the Fed, the ends justify
the means. If society as a whole is “better off” then it’s
apparently “okay” that the poor are poorer and the rich are richer:
It might be also true that the gain
to society’s well-being from stabilizing the overall economy is greater than
the loss coming from associated redistributive effects, in which case we could
safely focus on the overall effects and ignore the redistributive effects.
How convenient: Focus on the winners, not the losers.
Or something like that.
But the rose-colored glasses have only just been donned:
One could also argue that, in the
long run, the redistributive consequences of monetary policy might average
out. In other words, if the same type of households that tend to gain from
monetary policy during economic expansions also tend to lose from monetary
policy during recessions, then over time the average effect could be a wash.
Got that? The Fed is suggesting that while the
rich “may” get richer during boom times, recessions equalize
wealth inequality. So in a perfect world it might all even out.
First, let’s take a moment to note that the Fed
just admitted that deflationary forces are wealth equalizers and
inflationary forces benefit the rich. That’s noteworthy.
But let’s also note that the Fed’s money printing creates
endless artificial booms, and limits recessions. Ergo, the
Fed reduces the possibility of equalization and creates a continuous money
transfer mechanism from poor to rich – as they note:
…There is a good chance that
the redistributive effects do not average out because business cycles are known
to be asymmetric —expansions tend to be long and moderate, while
recessions tend to be short and sharp.
Exactly. And why are recessions so short?
Recessions “tend to be short and sharp” because the entire modus operandi
of Federal Reserve policy is to shorten recessions and lengthen expansions.
In other words, the Fed is admitting that it’s core
policy thesis which is inherently inflationary makes the rich richer and
the middle-class poorer.
But as long as the “economy” is doing better, it’s
all good. Right?
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GOOD?? .. THE
EXPLOSIVE INEQUALITY IS GOOD?? .. WE HAVE TO CHANGE THIS SYSTEM NOT MATTER WHAT..
THE SOLUTION IS TO UPDATE THE FDR NEW
DEAL, BEFORE IS TOO LATE.
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