There is no doubt that the Fed's large-scale asset purchases have caused major increases in a number of asset prices in the economy. This is especially true of mortgage backed securities and corporate bonds, and quite possibly of equities as well. For those people and institutions holding those things, the run up in prices has been a wealth bonanza.
Gerald EpsteinRaising interest rates might lead to some initial reductions in wealth by lowering asset prices, but it could also take a bite out of your paycheck and dampen your prospects of finding a job. It's a bit of damned if you do and damned if you don't.
Gerald EpsteinThe Fed needs to adopt new tools, on its own and perhaps in cooperation with the other parts of the US government, to improve the economy from the bottom up. This includes increasing facilities for debt forgiveness for under-water mortgages and excessive student loans; increased credit facilities for small businesses and cooperatives; helping to underwrite mechanisms for creating affordable housing in cities; and more restrictive enforcement of financial regulatory rules to help rein in excessive banker risk and pay.
Gerald EpsteinHere's the interesting thing: the fact that QE and lowering interest rates almost to zero has worsened inequality, does not mean that raising interest rates will help reduce inequality.
Gerald EpsteinCritics, often for good reason, are concerned that the Fed is wielding its vast powers in the interests of the banks and not in the interests of the people. After the financial crisis, Americans have perceived that the banks have been bailed out, but a significant proportion of the population is still in serious economic trouble.
Gerald Epstein