Engine of Inequality

Introduction

In 2008, the financial system collapsed suddenly and, to many regulators and central bankers, seemingly without warning. The “great financial crisis” that ensued wrought havoc, but by 2010 the financial system stabilized and stock markets began their upward climb. By 2013, the Federal Reserve was confident that the “Great Recession” that followed the great financial crisis had ended, with financial markets also well on their way to becoming bulletproof thanks to tough new banking rules. The US central bank thus proclaimed that all was right with the national economy and financial system even though only a tiny percentage of Americans benefit from rising financial markets, underemployment was endemic, and anyone who tried to save his or her way to a better life lost ground every day due to ultra-low interest rates.

The Obama Administration also congratulated itself on the sound economy and resilient financial system, Hillary Clinton campaigned on renewed prosperity, Americans knew more than economists about their own struggles, Donald Trump won, markets climbed higher, economic growth remained weak, and America grew ever angrier as economic inequality rose even higher. By 2020, COVID blew away every one of the foundations on which the Fed thought the economy and financial system so securely rested. A decade of rising financial markets atop acute economic and racial inequality made the US as vulnerable to an economic shock as an ill-kempt nursing home to the coronavirus. ...