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How Many People Are Being Hurt By The Fed?

Sunday, April 22, 2012 - 1:51 PM
I'm not a fan of Paul Krugman, but I find his commentary useful in understanding what many economists are thinking. His lastest NYT Op-Ed disputes a WSJ Op-Ed regarding who is helped and hurt by the Fed's expansionary monetary policy. One assertion Krugman makes will probably irk many of us:
Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.

Ken TuminKen Tumin5,471 posts since
Nov 29, 2009
Rep Points: 125,611
1. Sunday, April 22, 2012 - 5:39 PM
I can't bring myself to read anything written by this guy, so I didn't click on your links. However, I noticed in your excerpt his assertion that there are few people living on their interest and a fixed pension check. Well he may be correct, because there are many people living on interest without the pension check, if we include the pension check to mean a public employee pension or a defined benefit pension plan. Other than social security, which is not sufficient to live on, interest on your savings is critical to meet your expenses. Of course, Krugman would not have any idea about these things, since he is paid by a university to launch partisan hysterical rants totally unbecoming of an economist.
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
2. Sunday, April 22, 2012 - 7:14 PM
  • Nathanael -  NYS says it best in comments:
Professor Krugman, you're just not paying attention to the problem. Read this from "reader of tea leaves" at Naked Capitalism:

"in Elizabeth Warren’s 2003 book, “The Two Income Trap”, she notes that in 2001 the Fed lowered interest rates 8 times, but banks did *not* lower their interest rates in correspondence. Instead, the banks kept the difference, which in that single year of 2001 amounted to about $10,000,000,000 on credit card debt alone."

The money is getting stuck in the criminal megabanks. It's not a real monetary expansion. A real monetary expansion would put the money in the hands of the people, rather than leaving it stuck in the criminal megabanks.

The Fed needs to lend directly to people who AREN'T criminal bank executives.
ShorebreakShorebreak2,671 posts since
Apr 6, 2010
Rep Points: 14,501