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 economy and financial policy is thus a potent inequality force.

      In the US, money thus moves where monetary and regulatory policy drives it. And ever since the great financial crisis, policy drove money to take ever more speculative bets in financial markets that know neither risk nor bounds thanks again to financial policy. How could it have been that, the day in April 2020 that the US announced then-record COVID deaths, the S&P 500 finished its best week since 1974? As this book will show in detail, one need look no farther than the Fed, which that day also stepped in with trillions to backstop even the riskiest investments.

      It's thus clear that money determines an economy's haves and have-nots, but how does the inequality engine powered by money work? First, the engine analogy encapsulates the lesson in the Gospel of St. Matthew: “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath” (Matthew 25:29).

      The second reason to think of inequality as a financial-policy engine is that it helps us reckon with the critical importance of taking actions that put it into reverse or even turn it off. Letting an engine continue on its course even though the course is wrong only gets us farther from our goal at speeds set ever faster by the engine's cumulative force. To make a difference in inequality, we thus need to pick policies that make a difference as quickly as possible.

      Much inequality thinking proposes far grander repairs, but most are controversial, costly, and – most importantly – slow-acting. For example, reforming the nation's educational system is indeed an important inequality fix, but it will take years before kids in a better primary school graduate from institutions of higher education and decrease family inequality. We can't wait that long.

      Because inequality is an engine with cumulative force that chews up low-, moderate-, and even middle-income families, meaningful solutions must not just be fast-acting, but also politically plausible. Changes to US fiscal policy – i.e., to taxation and spending – such as a “wealth tax” or “guaranteed income” are appealing to some in macroeconomic and social-justice terms but face long, long political odds. Financial-policy fixes to the inequality engine aren't always optimal, but practical policy solutions to income and wealth inequality slow down the inequality engine and give us time also to make more profound structural repairs.

      So, what are these fast-acting, politically plausible, and high-impact financial-policy fixes? The first recrafts US monetary policy so it sets interest rates at levels I call a “living return” and retracts the Fed's safety net from beneath financial markets. Ever since the mid-2000s, the prime directive of US monetary policy is what the Fed calls the “wealth effect,” which as its name clearly implies assumes that the wealthier a few people get, the more money trickles down to the rest of us. The wealth effect worked in one sense – wealth has grown to prodigious heights in fewer and fewer hands – but it's done nothing for broader, shared prosperity. This book thus posits a set of monetary-policy actions premised on an equality effect derived from ground-up Fed interventions, not top-down largesse.

      And the Fed missed the fact that most American families lived paycheck to paycheck, making ends meet only via high-cost debt. The central bank touted its ultra-low interest rates as a boost to the wealth effect, but all they meant to the vast majority of American households was no hope of saving for the future. Most of the debt they used to get by also remained very, very expensive.

      As we'll see, this high debt burden, combined with the challenges to robust employment, hit America hard when COVID pulled the rug out from under all the Fed's mistaken expectations. Still, when the pandemic struck, the Fed created two huge facilities to backstop giant corporate debt and opened a “Main Street” bank that in fact did business with companies able to repay loans greater than $250,000 because their annual revenues were as much as $5 billion. The Fed could and should instead have opened a Family Financial Facility that provided ground-up – not trickle-down – emergency economic support.

      However, it's not enough for the Fed first to fix monetary policy based on a true reading of America's unequal economy and also to aid those truly in economic need under acute stress. We cannot have shared prosperity if the US financial system crashes disastrously every decade or so.

      The third fix to the inequality engine in this book thus redesigns US financial regulation not by removing all the costly rules imposed on banks after 2010, but instead by realigning rules so that like-kind financial activities come under like-kind rules. When only banks are under tough safety-and-soundness and consumer-protection rules, finance moves outside banks and thus outside a lot of equality-critical regulation. This it did from 2010 to 2020 and we know what happened then.

      Finally, we can't forget the inequality engine's fuel: money. Companies such as Facebook and Amazon aren't just dominant in social media and retailing – they plan to issue new forms of money on a redesigned payment system. This could give them control not only over with whom we associate, what we buy, what we read, and even how we vote, but also over how much money we have and to whom it goes how. We are used to thinking about money as the bills in our wallets or the numbers in our bank accounts, but a quiet revolution redefining money is well under way. If it proceeds without appropriate controls, then the inequality engine's fuel will go still faster and in even larger amounts to those who need it least.

      Thus, the last fix I detail crafts a new, digital money system under Fed control along with controls on the Fed to ensure that its new money enhances equal access and secure transactions, not just for the wealthy but also for the rest of us. Much in this book lambasts the Fed, but I still trust it with my money more than Facebook.

      To address the defining economic, social-justice, and moral questions of our time requires a fast-acting, targeted, and politically-plausible action plan aimed at the СКАЧАТЬ