The Blind Alley of Monetary Populism

In the United States and elsewhere nowadays, populist politicians often claim that easy monetary policy is hurting ordinary workers, thereby exacerbating income inequality. But while inequality is a problem, raising interest rates is no way to address it.

To say otherwise is a strange claim for anyone to make, especially populists. After all, low interest rates benefit debtors and hurt creditors, as does the inflation that can be spurred by monetary easing. Throughout most of US history, for example, populists have supported easy monetary policy as a way to help the little guy against distant bankers with hard hearts devoted to hard money.