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Pandemic reflationary policy and our social justice opportunity, Part 2

Updated: Jan 30, 2022

As of July 2022, while the pandemic is still active in the developing world, in the U.S. it would seem herd immunity is being achieved. Stores are open and a sense of “normal” is returning.

JPMorgan Chase forecasts the developed world's central banks will quickly pull back on “Quantitative Easing” operations to reduce bond purchases. This is the source of monetary policy “monetary fuel” mentioned in Part 1. It is yet to be seen if the central banks will get it right. That is, to pull back on the monetary fuel appropriately and to find the Goldilocks zone between deflation and high inflation.

It is also becoming clear the inequality of the economic bonanza. The income replacement group has mostly missed out on the great wealth transfer via Quantitative Easing. Mary Daly, the President of the Federal Reserve of San Francisco mentioned “It seems unfair” and “Another example of Wall Street winning and Main Street losing.” (1) The Ludwig Institute for Shared Economic Prosperity ("LISEP") indicates a tremendous difference between the traditional headline unemployment rate and the "True" unemployment rate, which includes people unable to achieve a living wage as being unemployed. LISEP indicates the True unemployment rate is 23.7% as of May 2021. This is compared to a headline unemployment rate of 5.8% during the same month. It would seem we may have missed an opportunity to spread the wealth generated by quantitative easing as widely as could have been. Some are quick to blame central banks for inequality challenges. This likely misses the mark.

Blaming the Fed is like blaming a hammer if it doesn’t fasten screws properly. The problem is not the hammer, the problem is the wrong tool was used. The proper tool for solving equality issues comes from fiscal policy. The Fed delivered the monetary fuel. It is fiscal policy that drives how the fuel is distributed. We can do better. In Part 1, we discussed fiscal policy to drive higher education levels to provide more equality. Also, in a related article Strengthening our vote - how we got here and what we can do about it we discuss core challenges and solutions to changing how our political leaders are elected and held accountable for implementing fiscal policies.


(1) The Economist, The pandemic has widened the wealth gap. Should central banks be blamed?


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