Monetary policy is to benefit the owners; not the workers. 100% employment will drive wage growth as demand exceeds supply. That’s not good for the stock market.
Source? That is an extraordinarily broad statement to make.
Central Banks' (the primary institutions behind monetary policy) primary goal is to promote a stable environment for commerce. This typically means maintaining a stable rate of inflation (2-4% for mature economies, 4-7% for frontier economies). This often requires performing a balancing act between managing unemployment and inflation. We have PLENTY of evidence to suggest that inflation is harmful for everyone, ESPECIALLY for low income workers. The stock market usually has ZERO consideration in the decisions central bankers typically make.
The Federal Reserve has been trying to get inflation above 2% consistently for over 10 years. What are the chances that they get that even now with rates at zero?
Also, I would disagree with you about the Federal Reserve not targeting the stock market or other assets. Anytime in the past couple of years that the stock market in the USA has dropped roughly 10-15%, the Federal Reserve has jumped in dropped rates. They might say the don't target the market, but in reality that is what they are doing.
I think biggest issue in the future will be how will the Federal Reserve ever raise rates. They can't even go above 2.5% without the market collapsing.
Whatever their goal is, the execution obviously benefits owners of capital disproportionately more than sellers of labor.
If economic growth is more than the interest rate, the owners pocket the difference. If economic growth is less than the interest rate, the owners get bailed out. But in all cases, growth for the sellers of labor always lag the growth for the owners of capital.
> We have PLENTY of evidence to suggest that inflation is harmful for everyone, ESPECIALLY for low income workers.
I'm under the impression that inflation is disproportionately hurts those with large amounts of cash saved. In this hypothetical scenario where we have 100% employment and it causes inflation, wages would rise with inflation, so rising prices wouldn't be an issue... right?
I agree with you in theory, but it seems naive to believe political appointees like a chairperson of central banks give zero consideration to the stock market when that market is fundamentally important to those who appoint them.
I hope they have that kind of integrity but I won’t be surprised if there’s a gap between theory and practice
> 100% employment will drive wage growth as demand exceeds supply.
I hesitate to call this a fantasy thought experiment (like all the atoms in the right place for a brick wall to allow a baseball to pass through). Not to mention the illusion of employment statistics (how it's measured), in many countries.
This stable equilibrium is impractical. The world is not a singular country. Employment within a single country is not representative of labor supply/demand, in this context.
This is the one of the two biggest flaws in most macroeconomics. They act as if the national economy is a closed system. Of course, if wages rise too high, (in addition to automation) the products the wages were producing can be produced in other economies and delivered as finished goods. Immigration is of course another violation of the closed system model, where labor flows to places with higher wages. (The other biggest flaw in macro is treating the economy as an undifferentiated GDP factory)
