It’s been a difficult month for the finance world, with global events and nervous investors creating some wild rides for the major indexes here and around the world. So when Federal Reserve Chairwoman Janet Yellen delivered remarks on Friday, many wondered what she might have to say about the recent tumult.
As it turns out, she chose a different topic altogether.
Ms. Yellen did not mention recent market turmoil or monetary policy during her 30-minute speech. Instead, she painted a bleak picture of the increasingly unequal distribution of wealth and income, warning that Americans already have relatively little chance to advance economically, and that the problem may be worsening.“I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity,” she said in her speech, which opened a conference on inequality at the Federal Reserve Bank of Boston.
Nick Perna, an economist who heads Perna Associates, a consulting firm in Connecticut, told the New York Times that Yellen is actually “the first Fed chair that has really gone out of her way to emphasize” the Fed’s mandate to encourage economic opportunity.
Neil Irwin added, “If there was any doubt that Janet Yellen would be a different type of Federal Reserve chair, her speech Friday in Boston removed it.”
More from the NYT report:
Ms. Yellen on Friday focused on four sources of economic opportunity: the means to raise children, access to education, owning a small business and inheritance. She said recent Fed research showed the distribution of those opportunities to be increasingly unequal. […]Government benefits and public programs offset some of that inequality, but Ms. Yellen noted that public financing for early education had not increased since the recession, while the cost of higher education continues to rise.Ms. Yellen noted that inequality could contribute to economic growth by serving as an incentive. But it can also make things worse, she said. She pointed to a relationship she described as the “Great Gatsby curve” – that in advanced economies with greater inequality, there is also less opportunity for intergenerational mobility. And mobility, she said, “is lower in the United States than in most other advanced countries.”
Irwin added, “Nothing about those statements would seem unusual coming from a left-leaning politician or any number of professional commentators. What makes them unusual is hearing them from the nation’s economist-in-chief, who generally tries to steer as far away from contentious political debates as possible.”
It helps explain why most Senate Republicans voted to kill her nomination, despite Yellen being “perhaps the most qualified Fed chair in history.”