Money Matters

Has income inequality improved under central bank policies?


Central banker claimed to have addressed and indeed remedied the problems brought upon us by the real estate blow up and banking crisis a few years back.

Let’s look at that claim and see if their remedies have indeed fulfilled that mandate.

The central bankers remedy have of course been ultra-low interest rates, quantitative easing (QE) and bailouts.

Have these policies fixed the unfunded pensions and massive pension losses that were incurred because of the crisis?

No. The super low interest rates have rifled pension returns with close to zero returns and in turn driven pensioners to buy into the riskier stock markets instead of parking money in good old fashion (and safe) savings accounts and US bonds which was common practice to insure safety of principal.

Did central bank policies resolve the political influence on Washington’s policy makers?

No. They made it worse by encouraging companies to borrow money at these super low interest rates to use on whatever they fancied, including more political lobbying.

Did central bank policies reduce reliance on credit and encourage savings?

Quite the opposite. They openly discourage savings with their low interest rates and encourage people to go out and borrow even more.

Have the central banks encouraged spending on worthwhile projects like new plants and equipment that would generate future income streams?

Absolutely not. Low interest rates instead encourage speculation and share buy backs. Neither of these produces anything but more speculation.

Has income inequality improved under central bank policies?

That’s an easy answer.
Income inequality has gotten much worse but I don’t need to tell you that.

What about moral hazard? In other words, teaching businesses and investors that if you make a bad investment you suffer the consequences.

No again. Bailouts destroy moral hazard entirely. Paying for someone’s mistakes teaches nothing but that it’s ok to be reckless. Bailouts encourage investors and banking institutions to go take on more risk because they won’t be responsible for the losses.

Have central bank policies put the economies of the world on the track to sound recoveries?
Once again, no. The economies of the world are anemic at best and now addicted to the free money QE and low interest rates provide.

In summary, not much has changed as a result of central bank policies for the good but the problems have surely gotten worse. One could argue that the more central bankers do the worse our economies and their futures become. It is difficult to come to any other conclusion based on the results we have witnessed.

This article expresses the opinions of Marc Cuniberti. Mr. Cuniberti hosts “Money Matters” on KVMR FM 89.5 and 105.1 FM on Thursdays at noon and syndicated on over 35 radio stations throughout the US and Canada. He has been featured on NBC and ABC television and on a host of made for TV documentaries for his economic insights. His website is www.moneymanagementradio.com.