Tags: Ben Bernanke | Monetary Policy | Inequality | Economy

Bernanke: Don't Blame Fed Policy for Income Inequality

By    |   Monday, 01 Jun 2015 03:13 PM

Former Federal Reserve Chair Ben Bernanke denies that the central bank's quantitative-easing stimulus measures worsened income inequality.

“The claim that Fed policy has worsened inequality usually begins with the (correct) observation that monetary easing works in part by raising asset prices, like stock prices,” Bernanke wrote in his blog.

“As the rich own more assets than the poor and middle class, the reasoning goes, the Fed's policies are increasing the already large disparities of wealth in the United States,” he wrote.

“First, widening inequality is a very long-term trend, one that has been decades in the making. The degree of inequality we see today is primarily the result of deep structural changes in our economy that have taken place over many years, including globalization, technological progress, demographic trends, and institutional change in the labor market and elsewhere,” he wrote.

“By comparison to the influence of these long-term factors, the effects of monetary policy on inequality are almost certainly modest and transient,” he wrote.

“Policies designed to affect the distribution of wealth and income are, appropriately, the province of elected officials, not the Fed. Alternatively, if fiscal policymakers took more of the responsibility for promoting economic recovery and job creation, monetary policy could be less aggressive.”

Meanwhile, New Jersey Governor Chris Christie recently claimed the Federal Reserve deserved part of the blame for a widening gulf between the rich and the poor.

Some investors find anti-Fed rhetoric unsettling, fearing politicians might try to curb the U.S. central bank's independence.

The Obama administration's regulatory policies, along with the Fed's monetary policies, have stymied economic growth by allowing financial assets to grow substantially in value while wages have stagnated, Christie said last month, Reuters reported.

"The Fed's easy money policies and the president's anti-growth policies have made the rich even richer and made our middle class work longer and harder for less pay and less promise for their future," Christie said.

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Former Federal Reserve Chair Ben Bernanke denies that the central bank's quantitative-easing stimulus measures worsened income inequality.
Ben Bernanke, Monetary Policy, Inequality, Economy
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2015-13-01
Monday, 01 Jun 2015 03:13 PM
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