Collateral damage from asset price support?

Some stylized facts:

In recent years the Fed has relied on asset price bubbles to support the economy — and keep unemployment down

Over the past few decades a shrinking fraction of economic gains has gone to labor (and a greater fraction to capital)

This was the era of the subprime loan (p. 13ff in link), where lenders put increasing value on the opportunity to take back the underlying asset and less on the borrower’s income stream

Query:

Is Federal Reserve asset price support distorting the fundamental structure of economic contracts by undervaluing labor and overvaluing capital?

Which raises another question: should the objective of monetary policy focus not on low inflation and low unemployment, but on a slowly increasing median wage and low unemployment?

Advertisements

1 thought on “Collateral damage from asset price support?”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s