Federal Reserve chief Janet Yellen warned Friday that the gap between the rich and poor in the United States is widening and has reached a near 100-year high.

In a speech at a conference on inequality in Boston, the Fed chair did not mention monetary policy nor the current turmoil in financial markets.

Instead, she focused on the widening wealth disparity and how that impacts economic opportunity.

"By some estimates, income and wealth inequality are near their highest levels in the past hundred years," Yellen said, noting the gap has grown steadily over recent decades, despite a brief pause during the 2008 crisis. . . . . . . . .


- Falling living standards -

Yellen said "some degree of inequality" is natural and indeed "arguably contributes to economic growth, because it creates incentives to work hard, get an education, save, invest, and undertake risk."

However, that same inequality can limit access to economic resources for those lower on the ladder, "thereby perpetuating a trend of increasing inequality."

Yellen offered no remedies for decreasing the rich-poor gap, but welcomed discussion on ways to better promote "equality of economic opportunity."

She said two "cornerstones of opportunity" are resources availabile to children and access to higher education, but added that ownership of a family business and inherited wealth can also be important sources of economic opportunity.

"For families below the top, public funding plays an important role in providing resources to children that influence future levels of income and wealth," Yellen said, citing programs like unemployment, welfare, and early childhood education.

She said college degrees also offer a net benefit, despite escalating tuition costs that have contributed to a dramatic increase in student loan debt -- the outstanding balance quadrupled from $260 billion in 2004 to $1.1 trillion this year.

This debt is disproportionately, and increasingly, affecting poorer families and may put college and graduate degrees out of reach for some, she said.

Globally, the gap between the haves and have-nots has reached levels not seen since the 1820s, the OECD said earlier this month, in a report that looked at trends in health, education, inequality, the environment and personal security.
The report said, however, that overall well-being has improved over the past 200 years, despite the enormous increase in income inequality, in part because factors like life expectancy and literacy, which have risen dramatically over the last 200 years.


Yellen said that the trend in recent years in the United States has seen "stagnant or falling living standards for many families."

Also worthy of note is a book by Linda Tirado.

What's it like to live in poverty and be a member of the working poor in one of the richest nations on earth?

Late last year Linda Tirado wrote an online essay that outlined her everyday experience and frustration that went viral around the world.

Now she's a writer and campaigner on poverty and class issues and has just published Hand to Mouth: The truth about being poor in a wealthy world.

An interview can be heard here:
http://www.abc.net.au/radionational/programs/saturdayextra/working-poor/5818526

Need it be so bad?

Rupert Murdoch used an after-dinner speech to the world's most powerful finance ministers to argue against the widespread quantitative easing adopted by central banks, arguing the policy was increasing the gap between rich and poor. . . .

. . .attendees said Mr Murdoch's most provocative comments were on the subject of unconventional ­monetary policy known as quantitative easing (QE) adopted by central banks in the US, Britain and Japan since the global financial crisis in 2008.

Mr Murdoch told the ministers that QE – a policy where central banks attempt to stimulate the economy by buying assets such as bonds with newly created money – could increase ­inequality around the world. He argued low interest rates and a policy where governments printed money pushed up the price of assets. This disproportionately rewards wealthier households because they own most of the assets, he added.

. . .A 2012 report by the Bank of England found wealthy families had been the biggest beneficiaries of its £375 billion ($683 billion) QE program. However, the BoE said all sections of the British population had benefited, arguing that without asset purchases "most people in the UK would have been worse off".

Mr Hockey echoed Mr Murdoch's sentiments during a forum hosted by the Institute of Economic Affairs in London this week.

"There is little capacity available to central bankers to go further," he said in response to a question about what the ECB should do to stimulate stagnant economic growth in Europe. "Loose monetary policy actually helps the rich to get richer. Why? Because we've seen rising asset values. Wealthier people hold the assets. So it is a very blunt [policy] instrument."


Read more: http://www.smh.com.au/business/the-economy/rupert-murdoch-lambasts-central-bank-stimulus-20141017-117eyu.html#ixzz3GS6OBrAM

stryder wrote on Oct 18^th, 2014 at 8:41am:


What you say is true but this doesn't explain why the level of inequality is rising so much. Those factors would, I should think, account for a fairly steady level. There are not likely to be an ever-increasing number of people making bad life choices or unwilling to get off their butt . . .it only seems like that.

The factors that are causing inequality to rise in the USA, Australia, Europe are globalisation and the move to the service economy.

Globalisation causes jobs to move to low labour-cost countries and be lost forever from western economies. Some people will say this is a fair redistribution of global opportunities. I make no judgement on that, I merely point out the effect of it.

The move to a service economy rather than manufacturing generally means a lowering of skill requirements when you think of things like tourism and hospitality. Therefore lower incomes follow.

stryder wrote on Oct 18^th, 2014 at 8:41am:


I don't have a fat butt, so I'd like to keep it, thank you very much 

Don't talk too loud. One day the billionaires may come after YOUR assets too. You wouldn't be the first in the world who has defended the super rich all his life UNTIL he got screwed by them and ended up old and poor and depressed.