Thread by @Trinhnomics

Good morning: The Fed says US inequality costs the country nearly USD23trn since 1990.

But guess who is helping push that inequality higher??? Le Fed of course with its zero interest rate policy + quantitative easing (QE) to reduce the costs of risks for capitalists vs labor.👈🏻

Who is fueling asset prices in the US? The Fed. How? By making the cost of taking risks LOW. When that happens, people who have access to cheap credit /capital GAIN at the expense of LABOR as the increase is less than asset price.

So relative wealth WORSENS or inequality rises.

Who is responsible for inequality in the US? Well, many many factors. But the one institution that is the ONLY ONE THAT CAN CREATE THE SUPPLY OF MONEY has got to be responsible.

Why? Because the Fed determines the PRICE OF MONEY or the COSTS OF RISKS.

kansascityfed.org/documents/8337…

And the Fed and its friends are working hard to BLAME everyone else but itself. Here is a paper posted by the Kansas Fed blaming RICH PEOPLE.

They are saying that it is the glut of savings by the rich that causes interest rates to go lower & not the Fed setting rates low.

Huh?

The well off just respond to incentives & got wealthy by not spending all their money & invest wisely. Are they to blame? Another discussion.

Let's look at the Fed mandate: 2% inflation & full employment.

CPI >4% in 2021 & GDP>6% & house price double digits.

Still ZIRP +QE👈🏻

Yesterday, the chief economist of the IMF says temporary or transitory is not even months of QUARTERS OR YEAR/S.

Meaning, they admit that the Fed has let inflation run high & banking on temporary but temporary is now, year, at least a year.

What??? The FED SETS INTEREST RATES.

That is what it does. It sets the SHORT END, and then creates incentives for market rates to be there.

For the longer end, it BUYS government bonds + MBS to keep rates low.

So what? IT SETS THE COSTS OF RISKS or the PRICE OF MONEY. And RISKS ARE LOW! So, CAPITALISTS GAIN. How?

The well-off DON'T SET INTEREST RATES. The Fed does. They GAIN because the Fed helps them REDUCE COSTS OF INVESTMENT & RAISE ASSET PRICES.

And the Fed knows the RICH DON'T SPEND. U don't get rich spending all ur money.

The middle class + poor do. So?

kansascityfed.org/documents/8337…

And now we have the SF Fed saying that INEQUALITY COSTS MONEY.

Of course it does. But the FED IS THE PERPETRATOR OF THAT INEQUALITY for the reasons I mentioned.

Not the savers. The savers ARE PUSHED TO INVEST by the Fed ZERO INTEREST RATE + QE. COSTS OF NOT INVESTING HIGH.

And so here we are today talking about whether the Fed should TAPER when CPI way past target & according to the IMF to be past the 2% target into END 2022.

Okay, we're not talking about the Fed RAISING INTEREST RATES AT THE SHORT END. We're talking about Fed buying less assetts.

Don't read the news as if it's the truth. That's the Fed version of the truth. ONLY THE FED CAN CREATE MONEY SUPPLY. And ONLY THE FED CAN SET THE PRICE OF MONEY, both short and longer end of interest rates.

It decides WHO GAINS through rates & relative increase of asset/wage.

Here is an article by the FT on the topic. Widely accepted that LOW INTEREST RATES REDUCES COSTS OF RISKS & push up ASSET PRICES.

Winners = ASSET OWNERS
Losers = NOT OWNING

Whether they are black/white/brown skinned is not key determinant. We all lose.

ft.com/content/577306…