Trump’s Inflationist Monetary Policy Favors Wall Street over Main Street
The Trump administration has tried to cultivate a reputation for preferring “Main Street over Wall Street.” Unfortunately, this image is belied by the administration’s renewed push for artificially low interest rates and monetary inflation. By embracing these policies, Trump has put himself squarely in the camp of “Wall Street over Main Street.”
This is because a policy of monetary inflation and low interest rates favors wealthy owners of assets while imposing higher prices and fewer income gains on people of more modest means. The Trump policies of inflation and low interest rates fuels levels of inequality far greater than would exist under relatively free market conditions. This is because the low-interest-rate policy increases disposable income far more rapidly for people at higher income levels than it does for people at lower income levels.
Contrary to the longstanding leftist myth that poor people benefit most from cheap money, it’s actually the wealthy who most reap the rewards of low interest rates and inflationary policy. The assumption behind the myth is that poor people go into debt more than wealthy people, and therefore, it’s the poor who benefit when they pay back debts in devalued currency.
That version of things is false on every level, however. First of all, the wealthy take out loans far more than the poor. When it comes to home mortgages, for example, the top ten percent (in terms of wealth) has more debt than the bottom fifty percent. So, which group will get an outsized benefit from paying back debts in cheaper money? It’s the top ten percent, not the bottom fifty percent.
Second, easy money fuels asset price inflation, and that’s only helpful if one owns a lot of assets. It’s not so great if—like most lower-income people—one doesn’t own a lot of assets.
As a growing number of empirical studies have shown, the net benefits of low-interest-rate policy for lower income groups—when there is any benefit at all—is very slight while the benefits for higher-income groups are far greater. We’re forced to conclude that Trump’s current drive for lower interest rates and more easy money is doing little or nothing to help the working-class people Trump claims he represents. In fact, his policies are probably hurting them, and his policies are definitely helping to enrich the highest income levels the most.
The Empirical Evidence
Strictly speaking, we don’t need new empirical studies to
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LewRockwell.com is a libertarian website that publishes articles, essays, and blog posts advocating for minimal government, free markets, and individual liberty. The site was founded by Lew Rockwell, an American libertarian political commentator, activist, and former congressional staffer. The website often features content that is critical of mainstream politics, state intervention, and foreign policy, among other topics. It is a platform frequently used to disseminate Austrian economics, a school of economic thought that is popular among some libertarians.
