6 July 2019   Leave a comment

The US economy entered the 121st month of its economic expansion, making it the longest period of positive economic growth in its history. That economic growth, however, has not been equally shared by all. Indeed, most of the economic growth has gone into the pockets of the wealthiest in the US. The distribution of wealth in the US has become profoundly unequal since the Great Recession of 2008-09.

“Household wealth — the value of homes, stock portfolios and bank accounts, minus mortgage and credit-card debt and other loans — jumped 80% in the past decade. More than one-third of that gain — $16.2 trillion in riches— went to the wealthiest 1%, figures from the Federal Reserve show. Just 25% of it went to households in the middle- to upper-middle class. The bottom half of the population gained less than 2%.

Nearly 8 million Americans lost homes in the recession and its aftermath, and the sharp price gains since then have put ownership out of reach for many would-be buyers. For America’s middle class, the homeownership rate fell to about 60% in 2016 from roughly 70% in 2004, before the housing bubble, according to separate Fed data.”

The political implications of this inequality are clear: a loss of confidence in political systems and their legitimacy, leading to the rise of populist nationalism.

Turkish President Recep Tayyip Erdogan has fired the head of the Turkish Central Bank, Murat Cetinkaya and replaced him with his deputy. The Central Bank has been consistently raising rates in an attempt to stem the rise of inflation in Turkey, but raising interest rates has also led to a sharp slowdown in the Turkish economy. Erdogan unquestionably believes that the slower economic growth poses serious political risks as evidenced in the loss by his party of the mayoralty in Istanbul. Erdogan’s move reflects a sentiment that has been growing in a number of countries by political authorities that believe that monetary policy should not be independent of political control, a situation that would likely lead to easy money policies that lead to higher inflation. In the US, President Trump has also been calling for the Federal Reserve to lower interest rates in a move designed to keep economic growth high.

Posted July 6, 2019 by vferraro1971 in World Politics

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