Economy, Federal Reserve

America's central bank helped the world's wealthy get richer during COVID

The Fed didn't just make America's rich richer during the pandemic. The world's wealthy class got a boost.

9/15/2021 7:30:00 PM

The Fed didn't just make America's rich richer during the pandemic. The world's wealthy class got a boost.

Business Insider tells the global tech, finance, markets, media, healthcare, and strategy stories you want to know.

all across the globe.Both trends were largely powered by the Fed. The central bank pulled interest rates close to zero and started buying Treasurys and mortgage-backed securities in March 2020 to bolster financial markets and encourage spending.The emergency actions indirectly boosted major markets. Expectations for years of easy monetary conditions led investors to furiously bid stocks higher. The rate cuts also kicked off a homebuying frenzy as people rushed to lock in rock-bottom mortgage rates.

NBA Heads To Northeast Farms For Annual Basketball Picking 'Law And Order' GOP 'Coddles Criminals' Like Steve Bannon, Accuses Scathing Editorial Kellyanne Conway breaks down what Biden's sinking approval rating means

The Fed led the way, and similar outlooks from other central banks saw such activity spread around the world. Global home prices rose at the fastest pace in four decades and show"little sign of stopping," JPMorgan economists led by Joseph Lupton said Monday. Intense home-price growth emerged in the US, Turkey, Russia, Korea, Australia, New Zealand, Brazil, and Czechia, they added.

The global stock and housing rallies padded the pockets of those best prepared to weather the pandemic. The world's wealthy class has the most exposure to both markets. And unlike the late 2000s, the global elite is benefitting from two market surges at once.

Chart via JPMorganJPMorganNot quite déjà vuThe Great Recession saw home prices nosedive as the US housing bubble popped. JPMorgan's home-price index nearly halved through the crisis before recovering over several years.Things are different this time.

Instead of plummeting like in 2008, home prices in developed economies bounced to fresh highs throughout the pandemic. And while global stock prices have retraced some of their recent gains, they still sit well above their pre-COVID highs. Central bank policy, then, is serving to prop up the global wealthy class more than in the late 2000s.

That surge brings new risks to central banks already in crisis mode, JPMorgan said. For one, leaping home prices could lift housing-service prices and drive inflation to uncomfortable highs.Periods of outstanding home-price appreciation are also associated with greater borrowing and heightened risk. That could raise fears of another market bubble just as central banks are looking to pare back their aid, the bank said.

"With the Global Financial Crisis still fresh in central bank thinking, the ongoing surge in house prices with little sign of abating adds to the risk of an earlier removal of monetary policy supports," the team added.And while the Fed hasn't yet changed its policy stance, some officials

Jay Black, Jay and the Americans Singer, Dies at 82 Drag racer slams into spectators in Texas; 2 killed, 5 hurt The Bumblebee’s Plight: Why It Is Disappearing in the U.S.

have raised concernsaround how easy money is affecting the housing market.The Fed's purchases of mortgage-backed securities could be having"some unintended consequences and side effects," Robert Kaplan, president of the Federal Reserve Bank of Dallas, said in May.

St. Louis Fed President James Bullard was even clearer in his worry."Maybe we don't need to be in mortgage-backed securities with a booming housing market," Bullard said onCNBC in June."We don't want to get back in the housing bubble game that caused us a lot of distress in the 2000s."

Finally, there was one striking example of the wealthy possibly benefitting from monetary policy decisions made by the central bank: stock trades by Fed officials themselves. Kaplan and Boston Fed President Eric Rosengren announced last week they would sell all of their individual stock holdings by September 30 after disclosures of their trading during the pandemic prompted ethics concerns. Kaplan caught flak for several trades worth at least $1 million, while Rosengren held stakes in four real estate investment trusts. Nonetheless, the trades happened amid a stock boom the Fed helped create.

Sign up for notifications from Insider! Stay up to date with what you want to know.Subscribe to push notificationsAn icon in the shape of a lightning bolt. Read more: Business Insider »

Watch: Turtle stranded on Cape Cove rescued by volunteers - CNN Video

Volunteers from three organizations have moved the massive reptile back into the ocean and will continue to monitor its progress.

Why Do People Want to Take Ivermectin for COVID?Why People Think Ivermectin Can Treat COVID, and How the Medication Really Works

Verzuz Moves to In-Person Fan Events With Ja Rule and Fat Joe Rap Battle at Madison Square GardenVerzuz, a streaming event that gained popularity during Covid-19 lockdowns, is holding its second major concert with a battle between rappers Ja Rule and Fat Joe good luck Ja Rule - Fyre. Cheese balls.

New Study Confirms Being Pregnant During A Pandemic SucksNearly 70% of expectant women have experienced distress during COVID — and they're still not getting the support they need. lol Get ready for the law suits. And 100% of the world its hard when there is no pandemic. i would be worried sick.

America Strong: Life, legacy of high school coach lives on through new foundationPaul Loggan, who coached at North Central High School in Indianapolis, died of COVID-19 in April 2020, but his students have created a foundation in his honor to help student athletes. Vote right now for Lea Kyle 10 votes to send her to Vegas and win 1 million dollars Today by AGT app nice I wish I contacted earlier gregsonharry2 this year I'm sharing this to encourage every beginner and Bitcoin lover to get in touch with her she is very legit and God fearing person gregsonharry2

Mississippi Teachers Ask For Help After 18K Kids Catch COVID In A MonthMississippi Teachers Ask For Help After 18K Kids Catch COVID In A Month One teacher is begging the governor to “take a second look at the science, look at the numbers, and see that Mississippi students need to be safe.”

Covid-19: NI records 10 Covid-linked deaths,1,304 casesThe total number of deaths linked to coronavirus in NI since the start of the pandemic is 2,478.