- The Federal Reserve’s decision to reduce its monthly bond purchases amid rising inflation has contributed to price spikes, benefiting billionaires and businesses while hurting low-income Americans, several experts told the Daily Caller News Foundation.
- Ending inflation would pose a huge risk to Wall Street and financial markets, Gregory Daco, chief US economist at Oxford Economics, told DCNF.
- As prices continue to rise, US businesses will benefit in the short term while low-income people will be hit by inflation, Stephen Moore, former economic adviser to former President Donald Trump, told DCNF.
- âBillionaires don’t care about inflation, but people who earn less than $ 50,000 a year are hammered about it,â Moore said.
The Federal Reserve’s decision to reduce its monthly bond purchases has contributed to a price spike, benefiting billionaires and corporations while crushing low-income Americans, several experts told the Daily Caller News Foundation.
As prices continue to rise, US businesses will benefit in the short term while low-income people will be hit by inflation, Stephen Moore, former economic adviser to former President Donald Trump, told DCNF.
U.S. stocks surged on Tuesday after a strong consumer spending report, with the S&P 500 rising 0.4% to 47,000.90 according to the Wall Street Journal. The S&P 500, a publicly traded index of the top 500 companies, is up 25% year-on-year as companies have benefited from the central bank’s accommodative monetary policy.
“These factors have really created hardship for working class Americans because every time they go to the store they pay more,” Moore told DCNF.
“While the average consumer has been criticized by the cost of living rising faster than real wage growth in recent months, those who have invested money in the stock market have done very well.” , said Joel Griffith, researcher at the Heritage Foundation. the DCNF.
Impact on the stock market
Ending inflation would pose a huge risk to Wall Street and the financial markets, Gregory Daco, chief US economist at Oxford Economics, told DCNF.
âAn unfavorable tightening of financial conditions in response to a faster and earlier than expected Fed tightening poses a risk to stock prices,â Daco said.
Rising inflation ultimately reduces the amount of each paycheck, Moore explained.
There are too many economists to count who say billions in new spending will only increase inflation further. These PsakiBombs are more than funny at this point. https://t.co/QfTf3EcNpL
– Joe Concha (@JoeConchaTV) November 15, 2021
âWhat inflation does is it reduces the value of your paycheck and the money you have in your wallet and your savings account and impoverishes people,â Moore said. Inflation, Moore explains, is simply a regressive form of tax because it impacts lower incomes.
âBillionaires don’t care about inflation, but people who make less than $ 50,000 a year are hammered about it,â Moore added.
In addition, financial markets benefited from the surge in prices, which allowed asset prices to rise significantly, Chris Markowski, founder of Markowski Investments, told DCNF.
Rising inflation allowed companies to raise prices, ultimately driving overall profit, the Wall Street Journal reported. Almost two-thirds of America’s largest publicly traded companies reported higher profits than the previous year, and 100 of those companies saw their profit margins increase 50% from 2019 figures, according to data obtained by the WSJ.
Walmart on Tuesday reported higher-than-expected sales in the third quarter of 2021 after the company raised prices as shoppers entered the holiday season, the Daily Caller News Foundation reported.
Home Depot saw a 9.8% increase in sales as the company benefited from higher prices and strong consumer demand. The strong earnings report pushed Home Depot shares up more than 6% on Tuesday, CNBC reported.
Why not put an end to asset purchases entirely?
If the Fed were to end its asset purchases, it would have a positive impact on the economy as it would start pushing prices down, Moore told the DCNF.
The Fed did not stop buying because it feared it would shock financial markets, Thomas Hogan, senior researcher at the American Institute for Economic Research, told DCNF.
âThe Fed is concerned that ending buying is too big a decision at some point,â Hogan said. “The amount of bonds they bought was such that any trade they feared would have a negative impact on the financial markets.”
The surge in prices is in part the result of the Federal Reserve’s lax monetary policy, Griffith told DCNF.
âThere is no doubt that the Fed is contributing to the inflation that we have,â Griffith said. “It is truly disturbing that the Fed refuses to take responsibility for its actions.”
Instead, the Fed blamed the price hikes on reopening and supply chain issues, Griffith told the DCNF.
Inflation grew at its fastest pace in 30 years, increasing 0.9% in October and 6.2% year-on-year. What’s more, consumer confidence also fell to its lowest level in 10 years in November, with Michigan consumer confidence hitting 66.8 from 72.5 in October.
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