Is the Fed at Fault?

The case is sometimes made, including in today’s NYT, that the Fed is largely responsible for increasing inequality in this country. Is that accurate?

Not really. It is true that low interest rates result in higher asset values, which primarily benefits the wealthy. It is also true, however, that low interest rates are an essential part of the Biden/Powell plan to run the economy hot and so to increase wages. If the Fed jacks up interest rates in a quixotic effort to fight inflation, the plan will run aground, and everyone will lose, including workers.

In short, the idea is not to create a desert and call it equality; it is to provide benefits for everyone. If the wealthy also profit from a system which substantially increases wages, so be it. The best way to deal with inequality is through taxing and spending, not interest rates.