Fed Chair Janet Yellen shied away from typical central banking topics, like inflation and interest rates, to talk about income inequality and economic opportunity at a conference Thursday sponsored by the Boston Fed. Yellen purported that the rising trend of inequality is drifting away from the values the United States was traditionally founded upon.
Citing various statistics to support her remarks, Yellen stated that the widening disparities could potentially hinder the country’s economic future, growth and revival. Alluding to investments in education and opportunities for business ownership, the Fed Chair noted that these areas have remained stagnant for quite some time.
Essentially, according to Yellen, the levels of today’s inequality haven’t been seen since the 19th century and they’re higher than the average observed during that same time span and much of American history. In fact, economic mobility in the U.S. today is lower than most other advanced nations.
“The extent and continuing increase in inequality in the United States greatly concern me. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity,” said the leader of the U.S. central bank. “The past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority.”
The Fed Chair said the housing market has rebounded, which has aided those at the bottom. However, she averred that the top five percent of Americans maintain two-thirds of all assets, which has remained the same for quite a while.
Officials say Yellen’s keynote address was supported by facts and data compiled by the central bank. Yellen did not take any questions from the audience or reporters in attendance Thursday.
This speech comes as the markets have tanked in the past few days. The S&P 500 erased its year-to-date gains, while Treasury bonds underwent a flash crash that saw it fall as much as 14 percent. Since Monday, the Dow Jones shed close to 600 points, but during the Friday morning trading session it has leapt more than 150 points on earnings news.
The downfall of the market has led to much speculation that the central bank may introduce a fourth round of quantitative easing – the Fed has significantly scaled back on QE3’s monthly bond-buying measures. Although Fed officials say it’s too premature to start discussing a fourth edition of QE, no one has denied its possibility.
“From my perspective, it’s much too early to even think about another quantitative easing,” Dallas Federal Reserve President Richard Fisher told the Fox Business Network. “As we’ve been saying for a long time, we’ve already fed the market too much Ritalin. And now [with the tapering] the market is correcting itself without our involvement. It’s way too premature to talk about another QE because the market’s actually doing the work.”
Contrarian investors, such as Peter Schiff and Mark Faber, utter that the Fed has attempted to allow the market to be on its own, but Wall Street is too addicted to the monthly injections of cheap money and stimulus that it can’t function by itself. Once the Fed notices this, says some economists, it will rev up QE once again.
