The lives of the rich have been enriched after the bust of Lehman

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The impact of the easy money that followed the fall of Lehman Brothers shows that inequality takes off when interest rates are kept artificially low.

In the decade since 2008, the US central bank kept its key interest rate below inflation. The Federal Reserve has also used quantitative easing and other new monetary tools to reduce long-term interest rates. This unconventional monetary policy aimed to stimulate wealth and household spending. He ended up inflating a handful of bubbles on asset prices. As wealth is unequally distributed, the bulk of earnings in the United States and abroad has benefited the rich.

That's what happened in the UK, where the Bank of England followed the Fed's booklet. A 2012 study by the bank showed that quantitative easing boosted household wealth by more than 600 billion pounds (about $ 775 billion), but nearly two-thirds of those gains went to 10% the richest. Another study by S. & P. ​​Capital IQ found that in the aftermath of the crisis, the richest decile of British households had increased their share of financial assets to the detriment of the poorest. As former US financial regulator Adair Turner wrote: "Quantitative easing has been good for the rich, and ultra-easy monetary policy exacerbates inequality." Few would disagree with this conclusion.

US income inequality has been particularly compounded by the Fed's interest rate policy. Most executive compensation is tied to share price performance. When easy money goes to the stock market, as it did in the years following the bankruptcy of Lehman, business leaders and their continuing suite receive an unexpected windfall. Management has also used cheap debt to buy back shares rather than investing in new facilities and equipment, as the Fed had planned. Since 2013, companies in the S. & P. ​​500 Index have repurchased approximately $ 2.4 trillion worth of shares, which has led to higher prices, according to Standard & Poor's. The executive compensation premium has become even greater.

Easy money has particularly helped Wall Street recover from Lehman's shock. The financial sector, including insurance and real estate, quickly regained its position as a US economic power, accounting for nearly a third of G.D.P. growth between 2010 and 2015, compared with 14% between 1998 and 2008, according to the Bureau of Economic Analysis. The bankers' bonuses came back with a vengeance – the average payment having reached the highest level since 2006, according to the estimates of the controller of the state of New York. These premiums are largely a result of fees earned on the issuance of securities, corporate financing activities and assets under management.

The debt levels of US companies have doubled since 2008, says Goldman Sachs. M. & A. Activity reached a record $ 2.5 trillion in the first half of 2018, according to Thomson Reuters. The recent $ 85-billion takeover by Time Warner's AT & T could generate up to $ 390 million in bank fees, Freeman & Co. said. Investment management fees have also increased when the stock market has rebounded after 2009. Activists pushed the venerable companies, from Procter & Gamble to Campbell Soup, to engage in financial engineering to increase shareholder returns and justify their management fees.

Life has been particularly sweet for the private equity world. The current boom in buyouts has been boosted by some of the cheapest financing in history. Private equity firms have even resorted to low-cost debt to seize foreclosed properties after the housing crisis. Blackstone's residential business, Invitation Homes, has become one of the country's largest homeowners. The barons of the buyout have never been so good. In the last five years, the Wall Street Journal estimates that Blackstone founder Stephen Schwarzman has earned more than $ 3.2 billion in dividends and payments of funds.

But think about the ease with which the money has treated the less privileged. The financial crisis hit them hard. According to the Saint-Louis Fed, 10 million homes have been taken over. The middle classes with most of their wealth attached to their homes, recorded the largest losses during a recession. The New York University economist, Edward Wolff, estimated that median wealth had dropped by 47% between 2007 and 2010. The rise in unemployment after the financial crisis and the weak market in the United States Employment in the following years contributed to income inequality.

Central bankers say that extremely low interest rates have helped repair the job market. This year, the official unemployment rate has fallen below 4%, its lowest level since 1969. That's good news, but the share of the employed or actively seeking labor force declined after 2008 and remains below 63%. Statistical reports of the work. Unconventional monetary policies contributed to the slowdown in productivity that hurt revenues. Until their recent recovery, wages in the United States stagnated after 2008.