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Why the Federal Reserve is an 'engine of inequality'

An employee prepares to feed currency into a machine at the Phoenix Processing Center. (Courtesy of the Federal Reserve)
An employee prepares to feed currency into a machine at the Phoenix Processing Center. (Courtesy of the Federal Reserve)

We often talk about what’s causing economic inequality — stagnant working class income, the way the U.S. taxes wealth v. wages, the high cost of living.

But banking insider Karen Petrou says there’s a powerful driver of inequality that’s avoided real scrutiny: the Federal Reserve.

“The Fed is the only entity I know of that could, under current law, make a meaningful difference,” she says. “It’s not unreasonable to basically make the Fed put its enormous amounts of money where its political mouth.”

Today, On Point: Interest rates, inflation, employment. That’s where the Fed formally flexes its power. That’s also why Petrou says it’s an ‘engine of inequality.’ Could that change?

Guests

Karen Petrou, managing partner at Federal Financial Analytics, a federal consulting firm. Author of “Engine of Inequality: The Fed and the Future of Wealth in America.” (@KarenPetrou)

Jeffrey Lacker, former president of the Federal Reserve Bank of Richmond from 2004 to 2017. Distinguished professor in economics at Virginia Commonwealth University.

Also Featured

Thomas Hoenig, distinguished senior fellow at the Mercatus Center. From 1991-2011, he was the President of the Federal Reserve Bank of Kansas City.

From The Reading List

New York Times: “Only the Rich Could Love This Economic Recovery” — “Conventional wisdom has it that the lower a central bank sets interest rates, the faster the economy grows. But the longer rates stay ultra-low, it’s not the economy that grows — it’s inequality.”

This article was originally published on WBUR.org.

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