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