4:29 PM, Apr 13, 2015 • By MATTHEW SCHOENFELD
Federal Reserve Chair Janet Yellen has devoted time of late to discussing the significant problem of inequality. At a conference on April 2nd, Ms. Yellen urged that research be undertaken “to understand whether any policies may hold people back or discourage upward mobility.” Perhaps such research might start at the doorstep of the Federal Reserve because the Fed’s sustained policy of near-zero interest rates has increased inequality, as well as made it more difficult for the middle class to climb the economic ladder.
The crux of recent Fed policy hinges on a simple premise: Very low interest rates inflate the value of financial assets like stocks. When interest rates approach zero on ‘safe’ assets, investors must look elsewhere in search of returns. For example, many Americans living on fixed incomes can no longer afford to hold their money in savings accounts or CDs. Instead, for potential gains, they are forced to look to riskier assets like stocks.
Not surprisingly, the stock market has boomed. In 2013, the U.S. economy grew just 2.2 percent, yet stock prices rose more than 28 percent in real terms. This means that the stock market grew 13 times faster than the economy, the highest ratio since the abandonment of the gold standard in 1971. In 2014, stock prices grew five times faster than the economy.
This increase in asset prices has pushed household net worth to an all-time record of $83 trillion. But because the benefits of asset inflation are so unequally distributed, the wealth gap has also widened to all-time records. In the U.S., the bottom 50 percent of the population own just 1 percent of the country’s net assets. The top 10 percent own 75 percent, making them the chief beneficiaries of the booming stock market.
Through this lens, the Fed’s broad gauge of inflation fails to account for the two-track economy that its policies have helped create. Thanks to technological advancement and low-cost imports, most goods that Americans consume—consumer staples, electronics, textiles, and nutritional food—have actually become more affordable over the last decade. But services that rely heavily on skilled labor have in many cases have become increasingly unaffordable; education—particularly higher education—is illustrative. Tuition costs have risen by more than 50 percent in real terms over the last decade amid flat wages and declining per capita income.
Asset-holders have been able to take the tuition hikes in stride because over the same period, the S&P 500 returned more than 70 percent in real terms and net assets more than doubled. But Americans reliant on wages have been forced to take on a raft of debt to absorb the increased costs; student loan debt has nearly quadrupled to $1.3 trillion since 2004. And despite all of this debt, according to the most recent Bureau of Labor Statistics (BLS) report, the top-fifth of earners still spend four times more per capita on education than all other Americans surveyed.
Education is the modern-day pillar of the American dream and the key to social mobility: Professional degree holders earn three times more than those who never attended college. So, as education becomes increasingly unaffordable for most Americans, what is the Fed’s solution? It is attempting to push prices even higher with continued ultra-low interest rate policy.
12:01 AM, Mar 14, 2015 • By IRWIN M. STELZER
So all’s well. No more financial meltdowns. No more taxpayer bailouts of bonus-hunting, risk-taking bankers. The Federal Reserve Board’s regulators have decided that all 31 of the largest U.S. banks, including seven that are foreign-owned, would survive a severe recession with sufficient capital to continue lending and remain in business without a taxpayer bailout.
12:01 AM, Feb 21, 2015 • By IRWIN M. STELZER
Markets work. That’s the message from Walmart’s decision to raise its starting wage for 500,000 of its 1.3 million US employees to $10 per hour starting next year. That’s 37% above the statutory minimum of $7.25.
Majority don't trust Fed to fix it.1:01 PM, Aug 25, 2014 • By MICHAEL WARREN
Things are getting more expensive, and the American people know it. A new poll from Rasmussen Reports found three-quarters of Americans say they are concerned about inflation, with 81 percent saying they are paying more for groceries and 71 percent saying they expect to pay even more for groceries a year from now. Here's more:
Go bold with gold.Jul 21, 2014, Vol. 19, No. 42 • By JUDY SHELTON
Republicans are searching for big, bold ideas that will inspire voters to embrace a conservative agenda. To unite its disparate segments, the GOP needs to uphold our nation’s founding principles—a key requirement for Tea Party adherents—while fostering the aspirations of those who believe the United States should play a strong leadership role in the world. A prime opportunity presents itself in the most compelling problem America faces: the need to restore confidence in its economic future.
12:20 PM, Apr 28, 2014 • By MATTHEW SCHOENFELD
Everybody seems to agree that the U.S. Federal Reserve's quantitative-easing program, which involves buying bonds to lower interest rates, plays a role in spurring economic growth. Folks differ on whether the contribution to growth outweighs the risk of inflation.
But what if the Fed's efforts are actually hurting growth, and the feared inflation has already arrived?
Zero interest rates have side effects.Feb 17, 2014, Vol. 19, No. 22 • By CHARLES WOLF
Income inequality in the United States has been increasing for a generation. The share of pretax income received by the top 1 percent of earners rose from 7.8 percent in 1973 to 17.4 percent in 2010. A broader and widely used measure of inequality—the Gini coefficient—indicates that inequality for the entire range of income recipients rather than only the top 1 percent has risen by 26 percent since the early 1970s.
A modest proposal for the new Fed chairman. Jan 27, 2014, Vol. 19, No. 19 • By ANDREW FERGUSON
It's been more than a week now and I’m beginning to suspect she’s not going to call, so here I will offer Janet Yellen the advice I’ve been hoping to give her privately since the Senate confirmed her as the new chairman of the Federal Reserve. My advice is: Think about John Cowperthwaite. By this I mean: Really think about
Bill de Blasio and Wall Street. Nov 25, 2013, Vol. 19, No. 11 • By FRED SIEGEL
First, a matter of numbers and nomenclature: Bill de Blasio, who is being hailed like Eliot Spitzer before him as the new face of American liberalism, won his race to be New York City’s next mayor with a near-record victory margin but also record low turnouts in both the primary and the general elections. There was no “populist” surge as reported in the press. De Blasio won 40 percent of the 22 percent who showed up for the Democratic party primary.
Hosted by Michael Graham.4:50 PM, Sep 19, 2013 • By TWS PODCAST
THE WEEKLY STANDARD podcast with the American Enterprise Institute's James Pethokoukis on the recent actions by the Federal Reserve.
10:53 AM, Sep 19, 2013 • By GEOFFREY NORMAN
Yesterday, the Fed decided that the economy was not yet sufficiently robust for it to "taper." Wall Street celebrated.
Today, the consumer put in his two cents, which is about what he thinks this "recovery" is worth. As Ben Schenkel at Bloomberg writes:
Consumers views of the U.S. economic outlook deteriorated in September to the weakest level in a year as higher borrowing rates started to chip away at progress in the housing market.
12:00 AM, Sep 7, 2013 • By IRWIN M. STELZER
It’s not that anyone here in Washington begrudges Britain, and to some extent Spain, their fledgling recoveries. But President Obama and other proponents of more government spending aren’t delighted that those nations’ austerity programs seem to be paying off in renewed growth rather than in the perpetual recession the Keynesian try-another-stimulus-crowd in the White House has been predicting. Conservatives are saying that the austerity sauce for the British roast beef would be just as tasty on the U.S. hot dog.
It’s policy that counts, not personalities. Aug 12, 2013, Vol. 18, No. 45 • By JUDY SHELTON
At first, it was fun—this parlor game of guessing who the Obama administration will appoint as the next chairman of the Federal Reserve. We all assumed it would be Janet Yellen, because she’s a woman. And then suddenly we had Larry Summers all over the leading financial newspapers receiving multiple endorsements from respected economists. There were sly references to his intellectual prowess and invaluable experience, not to mention (but they always did) his connections with Obama’s closest advisers on economic and financial matters.
No, no, and no.12:31 PM, Jul 31, 2013 • By ETHAN EPSTEIN
Have you heard the news? Janet Yellen is positively clairvoyant!
Yellen, vice chairman of the Federal Reserve and, evidently, a front-runner to replace Ben Bernanke as chairman in several months, “was one of the first members of the Federal Open Market Committee . . . to realize that the [housing market’s troubles] could cause a major recession.” (Alan Blinder, Wall Street Journal, July 29.)