From the Washington Post:
As Bernanke explained in his Sept. 13 news conference, he is trying to push down interest rates across the board so as to increase the value of assets such as stocks and residential real estate. If it works, he argued, the owners of these assets “will feel wealthier; they’ll feel more disposed to spend.” And rising demand will prompt more business to expand and hire.
Now, if that isn’t a trickle-down theory of economic growth, I don’t know what is. Institutional investors — pension funds, investment banks, hedge funds and the like — dominate equity ownership. Individual stock ownership is concentrated in the upper-income strata of the working-age population; the same is true for home ownership, with the wealthiest people owning the most valuable houses.
In addition, easy money may encourage commodity speculation, thus contributing to higher prices for consumer staples such as food and gasoline — which do not count toward the measure of “core” inflation that the Fed seeks to minimize.
Families in the lowest 20 percent of the income distribution scale spend more than a third of their income on food, according to the Agriculture Department, five times as much as those in the top 20 percent. As for gasoline, former Bush administration economist Diana Furchtgott-Roth estimates that households in the bottom fifth spend 10.1 percent of their annual income on gas, vs. 2.2 percent for the top quintile.
These potential effects are deeply ironic, considering that the loudest calls for easier monetary policy have come from the political left, while the right keeps warning about unintended consequences.
