When a conversation is had about capitalism, the same age-old argument inevitably comes up: “Capitalism widens the gap between the rich and the poor, and that’s not fair!” While the notion that everyone should have the same income doesn’t make sense in the first place, it is indeed true that the gap between the rich and poor is widening in America, but it’s not because of capitalism, it’s because of policies progressives have enacted along with something I call “crony capitalism”(when businesses are involved with government policy-making).
The gap between the rich and the poor in America is growing primarily because of The Federal Reserve. The Federal Reserve is pumping new money into our economy using a process known as quantitative easing. That doesn’t sound like it would have anything to do with income inequality, until you realize that the new money is going into the stock market, which is artificially inflating returns on stock investments, and that, in turn, causes people investing in the stock market to feel a false sense of good investment. So if you were wondering why the stock market looked like it was on the rise while the rest of the economy was still lagging behind, it is because of the Federal Reserve.
The Fed’s use of QE is boosting up the stock market and making it look like people are using good investment-making strategies, but that is simply not the case. It doesn’t matter whether or not it was a good investment, because the return on the investment is already inflated due to the extra dollars being pumped in by the Fed.
To exasperate the income gap, entitlement programs are only being added to, rather than reformed, and that further incentivizes low income citizens to not work, therefore they aren’t generating money within their own communities. If there is low employment within low income communities because of bloated government programs like WIC and welfare checks, those low-income communities will never help to close the income gap, because there is simply no money being generated.
The bottom line is this: The Federal Reserve is helping rich investors get richer, and government entitlement programs are forcing poor people to stay poor. If policy makers really cared about closing the income gap in this country, they would cut these cradle-to-grave government programs, as well as look at some options regarding Federal Reserve monetary policy that don’t include handing out money to wealthy investors and artificially boosting stock market numbers.