Fed Board Governor: Inequality May Hurt Growth (Ya Think?)

Posted by Bob Lord

Imagine that? Huff Po reports that a Fed Board Governor, Sarah Bloom Raskin, has "raised the possibility that rising inequality may restrain economic growth for several years."

I suppose we should be encouraged that someone in a position of modest power is starting to see inequality as a negative. But at the same time, it's stunning how cautious and late to the party she is, and she's supposedly a step ahead of her fellow Fed Board Governors.

Did it really take her this long to start worrying that if wealth and income flow out of the hands of people who buy stuff and into the hands of those who chase speculative investments, the economy might suffer?

“In my view, the large and increasing amount of inequality in income and wealth, which has been an ongoing development for decades, may have exacerbated the crisis,” Fed governor Sarah Bloom Raskin said Thursday in a speech delivered in Washington. “More research is required to determine whether it may also pose a significant headwind to the recovery from the crisis for years to come.”

More research is required? No, Sarah, it really isn't. Call Joseph Stiglitz. He'll tell you all you need to know.

But we have to keep telling ourselves: "This is a good development." Heck, in another decade or so, they might even conclude we perhaps ought to do something about inequality.