Economics

Как ФРС только что уменьшила неравенство

Dec 16, 2015 Alex Friedman

НЬЮ-ЙОРК – Федеральная резервная система США наконец-то это сделала. Впервые за почти десятилетие повышена учётная ставка. Вопрос о влиянии этого решения на процентные спреды, рынок акций в развивающихся странах, спрос на жильё и многое другое является предметом широких дискуссий. Но пока рынки привыкают к менее удобной монетарной политике, следует сказать и о её важной позитивной стороне, которую большинство людей игнорирует.

Неравенство в доходах и богатстве в США неуклонно росло, с тех пор как в 2008 году разразился мировой финансовой кризис, однако нормализация монетарной политики может стать вехой, знаменующей начало конца этой тенденции. Более того, она должна ускорить обратный процесс.

Взгляните на несколько мрачных цифр статистики, отражающих нынешнее положение дел. Реальный (с поправкой на инфляцию) медианный доход домохозяйств в США сейчас такой же, как в 1979 году. В недавнем докладе Pew Research Center отмечается, что доходы американцев в 2014 году были на 4% меньше, чем в 2000 году, при этом впервые за более чем 40 лет американцы из среднего класса перестали быть большинством населения страны.

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0 Comments on this paragraph, 59 Comments on this article

Bruce Steinback Jan 20, 2016

Sorry, but this struck me as a bunch of hooey. Among other things:

1. Inequality has not just been rising just since 2009, it's been rising since at least 2001 and probably since 1980. What do Fed interest rates have to do with that?

2. Inequality ALWAYS goes down during a recession and rises afterward. As the author mentioned and then ignored, it has to do with the fact that stocks do indeed go down in a recession, and then up after, no matter what the Fed does.

3. The low Fed rates probably did have some effect on the stock market, but it certainly had a huge effect on stabilizing housing prices, which are the greatest wealth of middle class.

4. Bank interest rates are NEVER a good deal, they always lag inflation. To suggest that increasing bank rates are a boon is either dumb or malicious.

I could come up with many more reasons, but that's enough for now.
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Avraam Dectis Jan 12, 2016

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This excellent article may be a bit too optimistic.

Hoping that wages will go up due to a tightening job market may be plausible, but recent decades suggest it is not a certainty.

One of the possible widespread misunderstandings on the issue is to view the trade off of wealthy versus not wealthy as a zero sum transaction. In other words, we assume that a dollar to the rich means one less dollar for the not rich, this may not be so and may be a pernicious assumption.

The key point to remember is that the wealthy spend a smaller percentage of their wealth than the less wealthy. Consequently, a skew of income to the wealthy is disinflationary.

Recognizing this effect, we are free to implement policies that would ordinarily be perceived as inflationary, but now, are merely counteracting disinflationary forces.

One simple example: We want a 15 dollar minimum wage but getting employers to agree is not easy. Why not have a federal "top up" program that essentially guaranteed a 19 dollar an hour wage by paying anyone working the difference between their actual pay and 19 dollars per hour?

This would be very helpful in raising up the poorest.

The issue would be paying for it. Since we are now more free to pursue policies that would ordinarily be inflationary, we could monetize the sums handed out under this program.

Thus we have a more than zero sum solution that diminishes inequality, counteracts disinflationary forces and provides a powerful incentive to take even the lowliest of jobs.

Avraam Jack Dectis
.
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Frans Verhagen Jan 5, 2016

what does half a percent mean for a low-income person who has a very low savings account?
I agree with Bernie Sanders in that the financial order has to be transformed starting with the introduction of an updated Glass-Steagall legislation.
In last instance I want to see a world order evolve that would become very serious about the looming climate catastrophe. I have proposed in Verhagen 2012 a system that would do this. www.timiun.net.
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Enrique Woll Battistini Dec 22, 2015

My view: Extreme inequality like today's, yesterday's and tomorrow's, lets its brawn be felt most direly through consumption, and can only be curbed through enlightened global tax reform that would enable redistribution of national incomes in such a way that the poorest 1% of the population, in terms of consumption, would enjoy monotonically increasing consumption with respect to national per capita consumption, aiming, if not necessarily achieving, per capita consumption equivalent to, say, 10% of per capita consumption of the wealthiest 50% of the population in terms of consumption, over time. Consider this:

https://www.academia.edu/19773066/OFA_-_At_the_Brink_of_Recovery_or_Conflagration_-_The_World_at_a_Tipping_Point_-_2011111503
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Luca Grande Dec 22, 2015

True, FED policies created inequality but this coming tiny raising cycle (probably 150bps max in 2 years before reversing, if not earlier) will do very little good to the middle class pockets. And considering their savings is probably more in stocks than cash, they too will suffer losses. The only thing to comfort them, will be that the richer will lose more. On the other hand, yes, wage inflation would be good for the MC but it's hard to imagine this happening in a slowing and more uncertain economy.
A new reply to this comment has been posted.
Enrique Woll Battistini Dec 22, 2015

Extreme inequality like today's, yesterday's and tomorrow's, lets its brawn be falt most direly through consumption, and can only be curbed through enlightened global tax reform that would enable redistribution of national incomes in such a way that the poorest 1% of the population, in terms of consumption, would enjoy monotonically increasing consumption with respect to national per capita consumption, aiming, if not necessarily achieving, per capita consumption equivalent to, say, 10% of per capita consumption of the wealthiest 50% of the population in terms of consumption, over time. Consider this:

https://www.academia.edu/19773066/OFA_-_At_the_Brink_of_Recovery_or_Conflagration_-_The_World_at_a_Tipping_Point_-_2011111503
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Manu Oquendo Dec 21, 2015

USA's income distribution suffers the effect of Industry loss during many decades.
It happens universally in recognition of the fact that Ricardo's "Comparative Advantage" only operates within very narrow limits of equal exchange. Outside these limits it does not work. On the contrary.

Once a country alters its productive structure towards an industrial desert, inequality gradually sets in. We all know it but we also recognize that to openly discuss it is very politically incorrect.
- Alex R. Mumm Dec 22, 2015
  
  It is high time that we stop being so 'politically correct' on a lot of issues. Does anyone thing for themselves anymore or are we too afraid?
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Nikolas Papavlassopulos Dec 21, 2015

The narrative is nice but it is based on erroneous premises. A rise in interest rates always benefits savers (the wealthy) and depresses employment prospects and wage income. How will this reduce inequality? If anything it exacerbates it.
By the way, mentioning of NAIRU - in a globally deflationary environment- is a joke, sadly on the less fortunate.
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Manu Oquendo Dec 21, 2015

Interesting article and very interesting reader comments.
Guess one has to go through them before saying anything.
Merry Christmas to the author and the readers.
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Tim Chambers Dec 21, 2015

Baloney. A sop to the impoverished masses.
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John A Werneken Dec 21, 2015

Abolish the Fed, keep the value of money stable, and interest rates will take care of themselves. No more asinine pro-employment policy that in fact subsidizes the casino side of Wall Street.
- Tim Chambers Dec 21, 2015
  
  Not a pro-employment policy at all, but a way for banks to profit off the spreads. The Fed has essentially been bailing out the bankers since they lost their shirts in Latin America three or four decades ago, and in bubble after bubble ever since.
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David Chipping Dec 20, 2015

Long overdue, even if it is the first step. Hopefully this will herald an end this disastrous period of monetary policy and a new period of enlightenment re the role of governement and the social contract.
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Robert Lunn Dec 20, 2015

For those who need data support just look at the Federal Reserve Report on the amount sent back to Treasury since the Fed began QE. The amount exceeds 500 billion since inception. The Fed is transparent and reports the number. The last article was in the WSJ in 2013.
Yet, to understand the magnitude of the cry that "never have so many done so much for so few", one has to extrapolate the benifit of those able to exercise the "carry trade" or borrow short and lend long (er). The Fed language for over two years was "rate will not rise for the foreseeable future". This was lightened to 18 months and now is "data dependent". Why would APPLE borrow 30 billion dollars with their cash? Other countless variations of the carry trade exist with no attempt to measure to my knowledge. Someone should.
To the credit of the Fed, they have been transparent on this since the beginning and have tried to explain to Congress when asked about this "financial repression". Also, one has to consider the counter factual or what else they could have done. Given the fiscal intransigence and political inability to explain the problem, it's anyone's guess but I don't think other suggestion are less painful to the many.
That said, Mr. Friedman scratches the surface of the the redirection of income to the top with his attribution to the stock market increase. Even a back of the envelope measure does not account for the income changes. Some economist not fearful of risking funding should examine this Fed action and compare to possible alternatives. The one thing for sure is this will get more broadly known and is dangerous if this continues.
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Lance Brofman Dec 20, 2015

Inequality declined during past tightening because the economy was growing and the Fed was tightening to slow down the growth.

"..Most likely a December 2015 FED rate hike would not affect the economy much. However, with the markets in turmoil worldwide and competitive devaluations popping up all over, it could be a colossal mistake. The question is whether the FED rate hike in December 2015 could be another 1931 when the FED increased interest rates and made sure that there would be a depression or it would be another 1937 (which is somehow remembered much more that the 1931 mistake). The 1937 mistake "only" halted the recovery and sent unemployment up from 14.18% in 1937 to 18.91% in 1938.
I saw presidential candidate Rick Santorum in a television interview saying that he would not reappoint Janet Yellen because he believes that the Federal Reserve has erred in "propping up" the economy which has allowed the Federal government to avoid taking the measures that would restore the economy to full employment. He indicated that balancing the budget would bring full employment and if the Federal Reserve stopped propping up the economy the Federal Government would thus be "forced" to balance the budget in order to restore economic growth. I would hope that Janet Yellen and the other members of the Federal Reserve open market committee, think long and hard and consider the thought process of those who are advocating raising rates as compared to those like Paul Krugman who are urging caution..."
http://seekingalpha.com/article/3707266
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Jason H Dec 20, 2015

It blows my mind how 20/320,000,000 (0.0000000625%) can own more than 50% of the population. It's sickening.

Monetary sovereign countries need to start buying unused resources like An employer of last resort (ELR), a work guarantee.. Modern money is not just a theory it's a description if how modern fiat money actually works and we can choose the policy actions:http://declass3.com/2015/09/18/this-bernie-sanders-appointee-has-proposed-an-elr-so-who-is-she-and-what-is-that/

Macroeconomics can be very counter intuitive. We need to fight that with reason, facts and logic.
- M M Dec 20, 2015
  
  When you have jokers leading and caring only about improving their own image, planning for their holidays and how to spend it, whilst the world is on fire…. What to expect.
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- george sos Dec 20, 2015
  
  aking a model with countless underlying assumptions,mix it up with a new lingo to cover up shortcomings in plain old logic,and there you have it!Solutions for everything,poverty included.....
  All this while another baby dies in the last 5 seconds from malnutrition in a developing country ,while the GDP rose by 0.00001 .....
  No it does not make sense to consider science a guessing game, a game of "lets measure them to see who has it bigger" on the backs of a whole human society.
  The justifications invented for the crimes against humanity from the globalisation and the capitalist market economy,is without precedent.
  
  Never before in history so many, made so many excuses, so that so few can exploit so many.....
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Gary Palmero Dec 20, 2015

The wealth of the wealthiest is tied to financial instruments, mainly the equity ownership of a corporation (Gates/Microsoft),( Buffett/Berkshire Hathaway) etc. The value of this wealth is set in the open market and can changed dramatically based on business prospects and other factors. This wealth is hardly intrusive on the lives of others.

Prior to 1900, most welath came from the ownership of agricultural lands and had a major effect on the people. Times change.
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Howard Johnson Dec 17, 2015

Mr Friedman;
You maybe correct, but your reasoning lacks data support and the data you present depend too much on correlation when your reasoning implies causation.
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dan baur Dec 17, 2015

So they have increased inequality for 7 years????

That is, if being envious of your neighbor is your thing.
- Tim Chambers Dec 21, 2015
  
  The inequality was not inevitable, but resulted from political choices made by a corrupt government. It was all bought and paid for by a few centa-millionaires, many of them now deca-billionaires. The nation is over its head in debt and finance, insurance and real estate now exceed manufacturing as the as a percentage of the economy. When that happens more wealth is extracted from the economy than is produced in value added. That can only further impoverish the nation and restrict economic growth. The only way to solve it is the way the people of France did two hundred some odd years ago, followed by a debt holiday.
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- M M Dec 17, 2015
  
  Exactly. Reducing inequality by increasing interest rates, it is contradiction in terms....
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Marc Torras Dec 17, 2015

Very good article. There will be a lot of talk about the (tiny) rate increase. But the truth is nobody knows what will happen or what would have happened with no increase.

What is clear is that markets and big institutions have become junkies, used to papa (now mama) FED coming to the rescue when things get ugly. It was about time to try begin changing change this dependency.

Inequality is a huge problem, much bigger than governments acknowledge. It makes more and more people unhappy, and then we get populist parties (and individuals in the US case) with high ratings and a lot of votes, and people willing to kill, be killed or blow themselves up.

In any case, Yellen saw an opportunity to begin raising rates with little or no side effects, and took her chance. It's a move in the good direction.
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M M Dec 17, 2015

Increasing interest rates when the markets are flooded with money that is held in the wrong hands (or in the hands of the few) is totally and utterly irresponsible. The current central bankers should have come up with a better solution to the “status Quo”. This is all about adding another failed policy, to the failed record and failed legacy of this Administration.
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Paul Daley Dec 17, 2015

Good article. Monetary policy is filtered through asset markets and has consistently worked in favor of property-owners throughout the "great moderation." It was easily the most unjust and inefficient use of public resources and public power any of us have ever seen.
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dan baur Dec 16, 2015

Nonsense. Poor people care about their daily lives, not about how much more others have. Once the basics are covered, they care about the next step up which can only come from a job and family ties, not from the government and not from other people's pockets.
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Michael Public Dec 16, 2015

Hang on - don't poor people pay interest and rich people earn it?
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Max Isert Dec 16, 2015

I whole-heartily agree with your analysis, Mr. Friedman.

''Negative real interest rates and quantitative easing have enforced financial repression on holders of cash, hurting savers, while broadly boosting prices of riskier financial assets, most commonly held by the rich.''

Without the rate hike the stock markets would have run increasingly hot and volatile.
- Max Isert Dec 17, 2015
  
  Just an addendum, Ms. Pula.
  ''A shortage in housing – caused by a drastic slowdown in homebuilding activity – has pushed up home values too much in some areas and made rents unusually high, according to the National Association of REALTORS®. Unless construction activity picks up soon, rising prices will make homes less affordable and rents too, NAR warns.
  
  Homebuilding activity for all housing types is underperforming in about two-thirds of 146 metros measured and that has prompted a significant drop in available homes for sale, according to NAR.
  
  "In addition to slow housing turnover and the diminishing supply of distressed properties, lagging new home construction — especially single family — has kept available inventory far below balanced levels," says Lawrence Yun, NAR's chief economist. "Our research shows that even as the labor market began to strengthen, homebuilding failed to keep up and is now contributing to the stronger price appreciation and eroding affordability currently seen throughout the U.S."'' - http://realtormag.realtor.org/daily-news/2015/09/15/housing-shortage-running-up-prices-rents
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- Max Isert Dec 17, 2015
  
  Ms. Pula,
  not if not more houses are being build. This might seem counter-intuitive, but higher interest rates will most likely also create a shortage in housing, because contractors and developers will take out less loans and take less risks, which will make prices stabilize or increase even. Supply and demand. In my county, demand for housing has been going up, but supply has not increased significantly, so home values have actually increased. I am in favor of creating or maintaining a certain housing scarcity and shortage to balance and calm down the housing market. I think these coming times and years will be more problematic for contractors and developers, but not for homeowners, or even realtors in my opinion. Landlord will also be a good and profitable career to have. More people will be renting in the future, instead of own houses.
  Also a house or a home should never be a financial investment, but an investment in one's family or one's lifestyle in my personal opinion.
  Robert Shiller agrees on this perception on homes as an investment:
  ''Economist Robert Shiller: Buying a house is 'a consumption choice,' not an investment''
  http://theweek.com/speedreads/563510/economist-robert-shiller-buying-house-consumption-choice-not-investment
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