October 29, 2015
Last night’s Republican debate was supposed to be about economic policy, but instead it was, once again, more about moderators asking gotcha questions. A few candidates managed to get in mentions for their tax plans, entitlement reform or over-regulation, but for the most part we learned little because the questions didn’t seem designed to educate the viewers about the candidate’s ideas for moving the country forward. There was, however, a great moment of economic clarity, thanks to Rand Paul, on the surprisingly overlooked role the Fed has played in increasing economic inequality.
Virtually all economists agree that the Fed’s low interest rates have been responsible for inflating stock market values. By reducing the returns to savings accounts, certificates of deposit and bonds, the Fed has intentionally driven ordinary investors to increase their investment allocation to the stock market, thereby boosting stock returns. Because people with more wealth tend to own more stock, those higher stock prices have led the rich to gain much more than the poor and middle class.
Low interest rates have meant low borrowing costs for large corporations with direct access to capital markets. This low-cost borrowing has boosted corporate profits which also flow mostly to the wealthy.
Read the full article at Forbes.com: Rand Paul Is Right: The Fed Is Increasing Inequality With Its Low Rates