By Pam Martens and Russ Martens: October 20, 2014
It took 200 years of hard data in a bestselling book by Thomas Piketty, awesome graphs and charts in Robert Reich’s documentary, “Inequality for All,” and years of scolding from Wall Street on Parade, but Fed Chair Janet Yellen has finally, and correctly, arrived at the idea that the nation’s economic ills are deeply rooted in the fact that U.S. “income and wealth inequality are near their highest levels in the past hundred years.” That was the message Yellen delivered on Friday in a speech at the Federal Reserve Bank of Boston, replete with stomach-churning figures from the Fed.
Make no mistake about it, coming at the end of a week that saw dramatic up and down spikes in the stock market – Yellen was sending a pivotal message to the Wall Street wealth hoarders – your billionaire standing could be as ephemeral as a day lily if we don’t fix this income and wealth gap.
Yellen quieted the crowd with this opener: “The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression.” Using data from the Fed’s Survey of Consumer Finances, Yellen punctuated her message with these hair-raising figures:
“The wealthiest 5 percent of American households held 54 percent of all wealth reported in the 1989 survey. Their share rose to 61 percent in 2010 and reached 63 percent in 2013;
“The lower half of households by wealth, held just 3 percent of wealth in 1989 and only 1 percent in 2013. To put that in perspective…the average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013.”
“This $11,000 average is 50 percent lower than the average wealth of the lower half of families in 1989, adjusted for inflation.”
A “major source of wealth for many families is financial assets, including stocks, bonds, mutual funds, and private pensions…the wealthiest 5 percent of households held nearly two-thirds of all such assets in 2013…”
Unfortunately, being the head of a Federal Reserve system that relies on goodwill with the big Wall Street firms to carry out its open market operations, Fed Chair Yellen apparently felt it would be impolitic to mention that this vast wealth inequality is coming from an institutionalized wealth transfer machine operated by Wall Street and supervised by a Fed that is regularly reviled for its wussiness when it comes to cracking down on blatant corruption by its charges.
What is particularly noteworthy is that Yellen specifically references the Great Depression but does not seem to comprehend where the slack in the U.S. economy is coming from. Franklin Delano Roosevelt, running for President in 1932, had no such difficulties.
In a speech at Oglethorpe University in Atlanta on May 22, 1932, in the midst of the Great Depression, Roosevelt made the following remarks:
“raw materials stand unused, factories stand idle, railroad traffic continues to dwindle, merchants sell less and less, while millions of able-bodied men and women, in dire need, are clamoring for the opportunity to work…
“our basic trouble was not an insufficiency of capital. It was an insufficient distribution of buying power coupled with an over-sufficient speculation in production. While wages rose in many of our industries, they did not as a whole rise proportionately to the reward to capital, and at the same time the purchasing power of other great groups of our population was permitted to shrink…
“Do what we may have to do to inject life into our ailing economic order, we cannot make it endure for long unless we can bring about a wiser, more equitable distribution of the national income…
“It is well within the inventive capacity of man, who has built up this great social and economic machine capable of satisfying the wants of all, to insure that all who are willing and able to work receive from it at least the necessities of life. In such a system, the reward for a day’s work will have to be greater, on the average, than it has been, and the reward to capital, especially capital which is speculative, will have to be less.”
Until Fed Chair Yellen is prepared to do more than give lip service to income and wealth inequality, her command over monetary policy will be sorely challenged.