
Ben Bernake: Monetary policy and inequality - noobermin
http://www.brookings.edu/blogs/ben-bernanke/posts/2015/06/01-monetary-policy-and-inequality
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SCAQTony
I liked Ben Bernake but he essentially admits that even though the purpose of
Quantitative Easing (QE) was to help the little guy on main street it really
only trickled down to corporations on Wall St.

Instead of buying back bonds and bailing out banks, what if the Fed would have
paid the monthly mortgages of home owning citizens for a year-or-two or paid
them as much as they have put into purchasing bonds via QE?

Benefitting the little guy by paying the banks their respective mortgage
payments would have kept both parties afloat (The banks and the home owner)
and would have been a better trickle down policy?

Then again, this is hindsight. YMMV.

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dragonwriter
The Fed's policy options are, by design, constrained. Paying citizen's
mortgages I don't think is within them.

Most things outside the realm of the Fed's usual mechanisms require Congress
to act (either to directly create the policy or to expand the Fed's mandate so
that the Fed can execute the policy.)

It's not QE by the Fed that should have been replaced by consumer bailouts,
but the congressionally authorized bank bailouts from the Treasury; that
fiscal action might have relieved the pressure for the Fed pushing hard on its
monetary policy levers for so long.

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noobermin
That was one of the main take aways of the article I found, that such powers
(fiscal policy and tax policy and spending) lie with law makers, not the fed.

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dev1n
QE was meant to work in tandem with the stimulus bill put forward by President
Obama. The stimulus bill would create jobs to help fuel demand, and interest
rates would stay low so that loans could be made more easily to companies that
contracted with the government, thus helping them to expand and creating more
demand in the economy.

Unfortunately the stimulus bill wasn't large enough (even though it was 787
billion dollars). This was the largest recession ever. The Great Depression
needed a stimulus bill called World War II. What followed were over 2 decades
of prosperity. The most recent stimulus plan simply wasn't big enough to allow
companies to grab Wall Street's attention, so Wall Street parked its money
elsewhere.

TL;DR: not enough jobs were created so people got poorer while Wall Street got
richer.

Edit: phrasing

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pm90
Maybe the reason for increasing prosperity was also the nature of economic
expansion after WW2. Most of Europe in ashes needing to rebuild
everything...same for Japan and Korea. The only country with the capacity to
provide supplies was the US, so we had the massive expansion in US industries.

Once other countries caught up though, the world started getting a lot tougher
for America. Luckily, it kept moving into other sectors via innovation.
Unfortunately, most of these new sectors (Computers, BioTech, Finance,
Robotics etc.) are just not as labor intensive so the benefits of economic
growth are then limited to a few instead of many.

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dev1n
This is an excellent point. I think this definitely had a lot to do with it.
Global demand was at an all time high and America certainly was one of a few
nations who could provide the goods necessary for rebuilding.

However I think we cannot ignore the fact that America itself was expanding.
Demand within America was increasingly fueling GDP as our war-time
infrastructure was converted to build materials for homes, highways and
specifically cars. These industries are now mostly being reimagined off of
American shores. The world is certainly getting tougher for American
industries but I believe there is enough demand that exists within America
that we could support ourselves more with "Made In America" goods than what we
currently do.

I have read adding tariffs to some goods made offshore by companies
incorporated in America could help out our economy, thus preventing the flight
of corporations and capital outside of American soil. America still throws a
lot of weight around regarding global demand so if we can force American
corporations to stay in America by tariffing goods they make offshore, I think
we could effectively keep jobs here, thus generating stronger demand.

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6stringmerc
_...widening inequality is a very long-term trend, one that has been decades
in the making...the effects of monetary policy on inequality are almost
certainly modest and transient._

This is totally self-serving historical revisionism. The Federal Reserve
played a significant role in the Dot Com bubble, in the Housing Bubble, and in
bailing out Too Big To Fail banks when there was a genuine chance for a much-
needed reckoning. To think such a powerful "monetary policy" figure such as
Greenspan or Bernanke would deny that their actions had anything but positive
outcomes is utterly preposterous. Both did extensive damage to the middle-
class, and Yellen is simply continuing the abhorrent tradition set by her
predecessors.

