The FED : Wealth Gap Widen
(Mon, 10 Aug 2020). Fed stimulus hasn`t helped those who needed it the most. The gap between the rich and the poor has widened during the pandemic. Federal Reserve Chairman Jerome Powell and Treasury Secretary Stephen Mnuchin are pleased with themselves for enriching Wall Street while cranking up inflation for the rest of us.
Millions of Americans have lost their job during the pandemic, and many won’t get it back. Thanks to Fed intervention, the rich are getting richer. Tightening lending standards and rising prices are making life harder for low-income Americans. For many Americans, the Fed has made their life worse since the start of the pandemic.
Permanent Job Losses Are Rising
Tens of millions of Americans lost their jobs during the pandemic. Millions of them face the prospect of permanent job loss that will force some to seek work in new industries or new occupations. A survey by The Associated Press-NORC Center for Public Affairs Research in July found that nearly half of those who have lost jobs during the pandemic say those jobs are gone for good. The increase in permanent job losses is the latest signal that the Trump administration’s dream of a rapid V-shaped recovery won’t materialize. This could create the need for even more government spending and long-term solutions beyond the temporary fixes that Congress has debated.
A recent Goldman Sachs poll found that 84% of business owners who had received loans under the Paycheck Protection Program (PPP) said they would run out of funding this week. As more businesses close, it also becomes more difficult to restart the economy once consumer demand begins to return, as people have fewer places to spend their money.
The Fed Has Helped the Rich Get Richer
While more than 40 million Americans have filed for unemployment, billionaires got $637 billion richer during the pandemic. That wealth increase is partly due to the stock market rebound, which was fueled by the PPP and the Fed’s actions. The Small Business Administration has made $349 billion available to small enterprises through the PPP. As in 2008, $243 million was clawed back by large publicly traded companies. The Fed has cut short-term bank interest rates to almost 0%. Low rates are encouraging stock purchases. When the stock market rebounds, the uneven bailouts mean that the rich still have money to invest and profit, while the middle and lower classes do not.
Banks Are Getting Tougher on Giving Out Money
According to a Federal Reserve poll, banks are tightening lending standards even as they are called on to provide cash to those affected by the pandemic. From commercial real estate to credit cards and automobiles, institutions are getting tougher on giving out loans compared with the second quarter, although demand has also declined in most categories. They are lowering credit limits and demanding higher minimum credit scores from consumers. Major net shares of banks that reported reasons for tightening lending standards or terms cited a less favorable or more uncertain economic outlook, worsening of industry-specific problems, and reduced tolerance for risk as important reasons for doing so.
The Fed Is Cranking Up Inflation
Trillions of dollars in emergency spending by the federal government and money printing programs carried out by the Fed have contributed to a devalued dollar. Recent statements from Fed officials point to a move toward an “average inflation” target in which price growth above the central bank’s usual 2% target would be tolerated and even desired. Wanting to raise inflation at a time when unemployment is so high and the economic recovery is in jeopardy makes no sense. Lower-income Americans are already struggling to pay their bills. Higher prices would only worsen their situation. The Fed should target stimulus towards those who need more help.
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