Engine of Inequality. Karen Petrou
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Название: Engine of Inequality

Автор: Karen Petrou

Издательство: John Wiley & Sons Limited

Жанр: Банковское дело

Серия:

isbn: 9781119730057

isbn:

СКАЧАТЬ argue that folks would get back to work if government benefits such as disability payments to veterans were curtailed.32 Others quibble with various statistics illustrating income and wealth inequality on grounds that this or that data point ostensibly fails to include one or another additional or different data point such as receipt of food stamps that a particular pundit prefers.33 None of these inequality dissenters notes that, even if one adjusts data points up or down to reflect refinements, trend lines are inexorable: America is clearly unequal no matter how one measures income or wealth and became far more unequal far faster after the financial crisis. After 2008, middle-class wealth collapsed, but the wealth of the top 10 percent grew 19 percent in the following decade,34 resulting in the largest wealth-share increase – 6 percentage points – since the Second World War.35 At the same time, middle-income family wealth was still below its 2008 level, and lower-income families lost 16 percent of their pre-crisis wealth (not much to start with, of course).36

      Something happened after the 2008 crisis ebbed that turned inequality into a faster and still more corrosive force running through the fabric of American social and political thought. This book will show that this something wasn't the great financial crisis itself – painful though it was, the years between 2008 and 2010 were actually more equalizing than those that preceded them due in large part to the short-term decrease in the value of assets held by the wealthy. What happened starting in 2010 is that federal financial policy-makers tried to boost the economy and redesign American banking through a series of unprecedented market and regulatory interventions. All were well intentioned but most were nonetheless still directly and demonstrably destructive to US income and wealth equality.

      This profit-maximization construct is so common that it has characterized American corporate life for the half-century and more since Milton Friedman first pronounced:

      Many dispute the economic wisdom and even the morality of this corporate edict, but it has nonetheless defined US business behavior before, during, and after the 2008 great financial crisis and again after COVID struck in 2020. Indeed, the profit-maximization, quarter-over-quarter ethos is one contributing crisis cause. However, unless or until investors relent, it prevails.

      As the Federal Reserve sucked trillions of safe assets from the financial system, investors looked desperately for places to put their funds. Starved of Treasury obligations and even of the chance to earn a reasonable rate of return by putting money in the bank, investors had little choice but to head to the stock market or to high-risk assets promising returns above the Fed's low rates. All this demand boosted equity prices, which led to more demand and still higher stock prices. The more financial markets go up, the still better off the wealthy become, at least for as long as markets go up or the Fed prevents them from coming back down.

      To be sure, many Americans owned stock in 401(k) plans and mutual funds. But wealth doesn't come from just owning stock; it's of course due to how much you own. The percentages showing that the rich benefit most from rising financial markets of course reflect the fact that stock ownership is best measured by the value of the shares each person owns, not by the number of people who own them.

      As a result, Fed asset purchases stoked stock-market rises that dramatically increased the wealth of those able to invest in the stock market. From 2007 to 2019, the S&P index for stocks rose 77 percent; that is, an investor with $10,000 in the market at the start of the crisis would have $17,700 to show for it after these twelve years. As shown below, small savers who were not also stock-market investors were worse off than ever before. Wealth inequality was thus even worse than it was before 2008, and the Fed is to blame for at least part of it.

      Of course, banks also lend to corporations. One might thus have thought – the Fed surely did – that banks wary of consumers would still lend to companies that then built plants and bought more equipment, stimulating the recovery as conventional thinking dictates. However, companies that got loans didn't boost economic growth; СКАЧАТЬ