The Fed, inflation and generational divide

In 2008, prior to the advent of “quantitative easing,” the M2 supply (a broad measure of the total money circulating in the U.S. economy) was $7 trillion … today it is $22.7 trillion. If you have a $100 bill in your wallet, $69 of those dollars were printed in the last 18 years, the other $31 were printed in the century before. That’s a lot of new money! No wonder there are so many more billionaires. The U.S. tripled the money supply.

And when the system is flooded with that much new money, there are clear winners and losers. If you have assets – a house, investments like Baby Boomers do because they have saved for decades – you win. Yes, inflation erodes some of that value, but in the past 18 years, stocks and home prices have outperformed inflation. Owning assets protects you against inflation.

If you don’t have assets (let’s say because you are young), that inflation raises the price you pay for everything, but you don’t benefit from asset appreciation, and incomes have barely kept up. In other words you lose. No wonder Gen Z hates the Baby Boomers. No wonder inequality has skyrocketed. In fact, inequality has surged more in the past 18 years than following any policy change in the history of the United States.

The number one argument against capitalism is that it creates inequality. Inequality created by successful entrepreneurship is good inequality, signaling opportunity and new markets. But inequality caused by inflation and crazy monetary policy has nothing to do with capitalism.

Jerome Powell and So-Called 'Fed Independence' | RealClearPolitics