Friday, July 11, 2014


It’s okay, Krugman, I get it. You’ve got the best of intentions, but bias is our blindspot and we all do it. Really though, it’s a hell of a stretch to argue that the rich don’t benefit from loose monetary policy:
“Quite simply, easy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent.”
Interest income is only (less than?) half the picture. The whole picture has to include capital gains. QE drives up financial asset prices, which shores up balance sheets, confidence, and thus economic recovery. But guess who typically has financial assets? Hint: it’s not people living from paycheck-to-paycheck.
“As you can see on page 26 of this Fed report, the median American family in the middle income bracket has about $19,900 in financial wealth. By contrast, the median family in the top income bracket has $423,800 in financial wealth. So any move by the Fed to push up asset prices is likely to increase wealth inequality in the short term.” -Washington Post
QE increases inequality. A simple Google search shows this is more than the general consensus, and even the Fed implicitly admits it. Not sure where Krugman’s coming from on this one, aside from his desire to conjure an evil straw man stymying his policy preferences:
“It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority.”
While I support aggressively accommodative monetary policy, I do so in spite of inequality, for which fiscal policy should compensate. While I want what Krugman wants, I don’t want it advanced on false merit, especially if it weakens the necessary impetus for complementarily “accommodative” fiscal policy.