Irony of the Day: Yellen Moans About Income Inequality; Seven Things That Cause Inequality

Those seeking the irony of the day will find it comes straight from the mouth of the Fed Chair. Please consider Janet Yellen Bemoans Rising US Inequality.

Janet Yellen decried rising inequality on Friday in an unusual speech that may lead to accusations of politicising the US Federal Reserve.

Speaking at a conference in Boston, the Fed chairwoman said she was “greatly concerned” by rising income and wealth inequality, and asked whether it is compatible with American values.

Her remarks will delight the Democrats who championed her as Fed chair, but risk a backlash from Republicans, who may feel she is using the platform of the central bank to promote the causes of their political rivals.

It marks a big step in defining Ms Yellen’s term at the Fed. She has tried to popularise the role, meeting with unemployed people, and now speaking out on issues beyond monetary policy. Despite recent turmoil in financial markets, Ms Yellen made no reference to economic conditions or Fed policy in her speech.

“The extent of and continuing increase in inequality in the United States greatly concern me,” said Ms Yellen. “The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression.”

Look Inward Janet!

Instead of bemoaning income inequality as "incompatible with American values", the Chair ought to look at the cause of it.

Seven Things That Cause Inequality

1. Fed-sponsored bank bailouts
2. Fed interest rate suppression that punishes savers and those on fixed income
3. Fed QE to goose financial assets (primarily held by the wealthy)
4. Fed-sponsored inflation that benefits those with first access to money: banks, the already wealthy, and government (via property and other taxes)
5. Government deficit spending, war-mongering, and other inflationary policies
6. Government interference in the free markets, especially housing, health care, and education

Is Inequality Always a Bad Thing?

Notice, I said seven but only listed 6. Here's the bonus 7th: Innovation.

Those who invent better ways of doing things (or simply do things better than anyone else) often succeed wildly.

But the 7th is the way it should be. It is the essence of free-market-capitalism. Looked at properly, income inequality is actually a necessity!

It's the way income inequality is achieved that makes it good or bad.

Of seven major things that cause income inequality, four are Fed-sponsored, two are government-sponsored, and one is as it should be.

Which one does Yellen bitch about? The 7th of course.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com