New York Times Goes To Looney Tunes Land On The Fed

The New York Times had a bizarre piece by Karen Petrou attacking the Fed for its low interest rate policy. The column title tells the story, “Only the Rich Could Love This Economic Recovery.”

This is bizarre, because people who read the news section of the NYT would know that workers have more bargaining power in the economy right now than at any point since at least the late 1990s. The quit rate hit a record level in April, and even with a drop in May, it is still at a 20-year peak. Workers, especially at the bottom end of the wage ladder, are seeing substantial wage gains.

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Photo by Emre Turkan on Unsplash

The pandemic payments have also allowed many families to pay down debt, leaving their finances in much better shape than before the recession. Also, the expanded subsidies in the health care exchanges have allowed many people to get health care insurance who could not previously afford it. The NYT had a very good column earlier this month by Julia Coronado laying out many of the measures showing the improved economic plight of low and middle class families. 

It’s very hard to understand Petrou’s case. It’s true that low interest rates tend to raise asset prices, and since the rich own a hugely disproportionate share of assets, this means that they will get richer if rates are low, but it is hard to see how low and middle class people would benefit from higher interest rates.

Petrou tells readers in a section headlined “What Is the Fed For”:

“The Fed’s role is spelled out under its statutory charter, which establishes the road map for unraveling the inequality it helped create. 

“The charter’s first goal is “full employment,” meaning pretty much everyone who wants a job has one. This would get a meaningful, immediate boost if the Fed reversed its cheap-debt policies that lead companies to take out debt to fund investor profits, instead of funding new plants or products.

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