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From the paper: "It might be also true that the gain to society’s well-being from stabilizing the overall economy is greater than the loss coming from associat
by randomname2 11y ago
From the paper:
"It might be also true that the gain to society’s well-being from stabilizing the overall economy is greater than the loss coming from associated redistributive effects, in which case we could safely focus on the overall effects and ignore the redistributive effects."
"One could also argue that, in the long run, the redistributive consequences of monetary policy might average out. In other words, if the same type of households that tend to gain from monetary policy during economic expansions also tend to lose from monetary policy during recessions, then over time the average effect could be a wash."
So they suggest that while the rich "may" get richer during boom times, recessions equalize wealth inequality, so in a perfect world it might all even out.
It's actually quite noteworthy that just admitted that deflationary forces are wealth equalizers and inflationary forces benefit the rich.
- randomname2 11y agoAnd as Fed policy creates endless artificial booms, and limits recessions, they reduce the possibility of equalization and creates a continuous money transfer mechanism from poor to rich, as they note: "There is a good chance that the redistributive effects do not average out because business cycles are known to be asymmetric —expansions tend to be long and moderate, while recessions tend to be short and sharp." And recessions are short and sharp precisely because the whole modus operandi of the Fed is to shorten recessions and lengthen expansions. So it's admitting its (inherently inflationary) core policy thesis makes the rich richer and the middle-class poorer.