Handmaids Of Wall Street—Trickle Down Still Doesn’t Work (Part 2)

The Fed’s explicit pro-inflation policy is profoundly anti-middle class. That’s because it works through the mechanism of financial asset prices, rendering it structurally subservient to the traders, speculators and money shufflers of Wall Street.

On this matter, in fact, the data leave no room for doubt. Since the late 1980s when Greenspan completed the Fed’s transformation into an instrument of monetary inflation and wealth redistribution to the top of the economic ladder, it hasn’t even been a close call.

As shown in the chart below, over the 34-year interval since Q3 1989 cumulative CPI inflation has reached 144% per the brown area of the graph. At the same time, average weekly earnings of private sector production workers have barely stayed ahead of the CPI, rising by 187% per the  purple area. By contrast, the net worth of the top 0.1% of households (richest 130,000 families) has soared by 956% (green area)

That’s right. The wealth gains at the tippy-top of the economic ladder have risen nearly 6.6X faster than the CPI, and more than 5X faster average weekly earnings.

Here’s the thing, however. There is no sound economic principle that would even remotely explain or justify a gain in asset values five times greater than the rise of average earnings from production over more than one-third of a century. To the contrary, this is a case of bad money at work, the fruit of a rogue central bank that has been captured  by the Wall Street forces that it pretends to be harnessing in the public good.