So am I and so are most decent people. So bravo Janet, you are a decent person. You are greatly concerned about inequality in this richest nation on earth.
Now let’s work the details…
“It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority,” Yellen said in a speech to a conference on inequality sponsored by the Boston Fed.
It is also no secret that manipulating short-term interest rates toward zero kills regular peoples’ ability to save. It creates and furthers a wealthy investor class directly at the expense of the public, who have traditionally been savers.
“I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity,” she added.
Which is why I harp on it so often Janet. Don’t you get the linkage between policy and the result you so eloquently fret about? Throw in the effects of inflation, the same inflation the Fed is trying to promote right now, and you have a double hit against the non-investment class.
Yellen said that some degree on inequality of income and wealth contributes to economic growth because it rewards hard work and risk taking. But the concern is that “inequality of outcomes can exacerbate inequality of opportunity, thereby perpetuating a trend of increasing inequality.”
WTF? Janet channels Greenspan and his famously confusing, if intellectual sounding gobbledegook.
Income inequality — as measured by what’s called the Gini index — is up 4.9% since 1993, the earliest year available for measurement, according to Census Bureau data.
In her speech, Yellen did not attempt to answer what she called the “difficult questions of how best to fairly and justly promote equal opportunity.”
So let’s leave that to political people arguing political cartoon points and leave monetary policy out of the discussion.
Two building blocks to greater income — college and owning a business — were now uncertain, she said. College costs are making it hard for young people to obtain a degree, and it is harder now to start a business, she said.
Along with food costs, healthcare costs and all sorts of other costs that have risen over the years and decades during an inflationary regime that has been in place since the Greenspan Fed took the ball from the Volcker Fed.
She noted that economic mobility in the U.S. is lower than in most other advanced countries.
Because in this country, mobility means connectedness and in particular, connectedness to the discount window. The further you are from first user status at the discount window, the less mobile you are.
Yellen said she was concerned the large and growing burden of paying for college may make it harder for many young people to take advantage of the opportunity of higher education.
It is also harder for less wealthy Americans to start a new business, she noted.
Used to be that people started new businesses after having saved (Thing 1) and invested (Thing 2). Now there is little incentive to do Thing 1 and Thing 2 is now known (and encouraged) as speculation.
But I am glad you are concerned about rising inequality Janet.