A few weeks ago, I did a two-part interview on Dan Denvir’s The Dig, which in my somewhat biased opinion is the best podcast out there. 1 Of all the views I expressed, the most controversial within the left might be my thoughts on asset price inflation. There are a couple aspects to discuss there, and this post sets out in more detail my thinking about one aspect: the common claim that that the Federal Reserve’s monetary policy since 2008 has increased inequality, specifically wealth inequality. 2
The basic idea is that sustained low interest rates and quantitative easing lead to an increase in asset prices, and thus (since asset ownership is distributed extremely unequally) to an upward redistribution of wealth. The complaint can be heard left, right, and center, from Jacobin to the Koch-funded Mercatus Institute to the Financial Times. It comes from people with only a casual knowledge of the Fed as well as from brilliant scholars who know more about money and banking than I ever will. Yet, as we will see, the evidence for the claim is extremely thin, bordering on nonexistent.
The idea appeals to certain intuitions including, for those of us on the left, the suspicion that macroeconomic policy under capitalism is always a choice between bad options. On the center and right, by contrast, there may be a more perverse appeal: the idea can confuse and disorient their political enemies by implanting the sense that progressive dovishness is at odds with progressive egalitarianism. 3 Meanwhile, talking about inequality while arguing for punitive Fed policy offers these avowed anti-egalitarians a zero cost opportunity to pretend like they have a social conscience. Less cynically, the idea that the benefits of low rates (higher employment) are perfectly balanced by downsides (more inequality) perfectly matches the both-sides-ism so common in our media and chattering classes.