It's not just inflation: Economist argues that fed policy also creates income inequality

 

By Monica Showalter

A week or two ago, President Trump was making restless noises against the Federal Reserve, and its wokester chairman, Jerome Powell, calling him persistently slow on the uptake in hitting his inflation targets. He was right, but the media and the markets screamed, as they view any Fed chairman as above reproach.

Some media pundits said that Trump was setting the stage for blaming Powell for rough state of the economy.

Now he seems to have backed away, but hopefully not forever.

That's because he was right the first time. The problem is that the Fed is responsible for controlling inflation, but rather than watch the M2 money supply, which is at the heart of the matter, it is so busy watching multiple other economic indictators, as well as engaging in DEI that it always makes bad or at least laggardly decisions.

Former Reagan budget director David Stockman offered his criticisms of the Fed as creating lower incomes for American workers -- I wrote about them here.

Another former Reagan official, Steve Hanke, who is a professor of economics at Johns Hopkins University, and a monetary expert, had this new group of criticisms -- that the Fed's failure to focus on M2 money supply (which went haywire big under Joe Biden) is why we have income inequality, it's very much in the same neighborhood as the Stockman argument, and it is germane to the issue at hand, which is why Americans are still falling behind.

His argument, which he has explained to me in the past, notes that inflation comes in successions of price hikes, the first and biggest of which is asset prices, or, the prices of stocks, bonds, real estate and other financial instruments, then moves down to oil and energy, and then moves on down to the price of more volatile consumer items such as eggs. 

Because the wealthy own nearly all the assets in that first category, their incomes swell -- at the expense of those in the middle. Which is why we have a "barbell-shaped" economy -- and the rich are getting ever richer.

No wonder so many of them support anti-market leaders like Joe Biden and Kamala Harris. Anything to build the old wealth portfolio.

It's food for thought as President Trump circles the matter of whether to keep the Fed chief or not. In this case, if he appoints a new chairman who pays attention to M2, the result would be a Reaganesque economy or better still, a Trump first-term economy, which is the idea. If he doesn't -- he will be blamed for what's really the Fed's incompetence.

https://www.americanthinker.com/blog/2025/04/it_s_not_just_inflation_economist_argues_that_fed_policy_has_also_created_income_inequality.html