The US Federal Reserve (Fed) is the one and only institutions that is specifically in charge of fighting recessions and lowering unemployment. It used to be such a controversial institution that it was prepared for rioting. The Chicago branch of the Fed had a fortified machine gun nest cemented into a perch over the entry lobby providing a clear shot of the entire floor. But today, only the libertarian wingnuts still want to end the Fed, and the machine gun nest was recently remodeled away. Unfortunately, the wingnuts want to end the Fed for all the wrong reasons. The rest of us should care much more about the Fed. Most people blame the president for bad economic policies, but the president’s main influence over the economy is though his weak influence over the Fed and the masses don’t get that at all. The president only has indirect effect over the economy through fiscal policy which is dominated by congress and through monetary policy which is independently controlled by the Fed.
Unfortunately, the Fed is a mutilitarian institution. It’s glossary of economic terms defines “Standard of living” as “A measure of the goods and services available to each person in a country; a measure of economic well-being. Also known as per capita real GDP (gross domestic product).” Its glossary does not even mention median income anywhere. No wonder it lets median income stagnate. What often happens during recessions is that the income of the wealthy elites recovers earlier than the median American and that quickly pulls per capita GDP (income) up because their income is so large compared with the half below the median. So the Fed thinks that the recession is over even though more than half of Americans are still in a deepening recession. As the median income keeps dropping, the Fed starts worrying about slowing the growth of incomes because the incomes at the top are growing so fast. This is because the Fed cares deeply about low inflation and cares nothing about the majority of Americans.
The Fed needs to start worrying more about the real incomes of the majority of Americans and less about the banks and inflation. That would serve most Americans better than its traditional policies which are overly biased towards serving elites.
Unfortunately, the American government does not even track the kind of median income data that the Fed would need to have to be able to serve the average American better. The Fed publishes over 83,000 different data series, from the Anchorage Alaska House Price Index to the Z-score for Uganda’s Banks, but it doesn’t have any data about the average American (median). The Census does track median household income, but that data is always out of date because the government does not care enough about it to keep it current. Fortunately, a private company has been bringing median household income more up to date. Sentier Research has reported that real median household income is still 7.3% lower than it was at the beginning of the recession and it has not significantly recovered from its low point in 2011. This is something that the Fed should be paying attention to rather than mean (per capita) GDP. The majority of Americans are still in the depths of the recession. The median income is 5.6% lower than it was in June 2009 when the Fed says that the recession officially ended.
The longer-term trends are even more depressing. Sentier Research’s data only begins in 2000, but this graph shows that most Americans were much richer 13 years ago than they are today.
With economic results like this, it is surprising that the majority of Americans aren’t protesting in the streets. Perhaps it is because most people don’t know that this is happening. There is a sense of economic unease that has led to the Tea Party movement and the Occupy Wall Street movement, but both movements lack economic theories to explain their unease with the economy. If they understood more about how the economy works, the Chicago Fed might have to reinstall its machine gun turret in the lobby. It doesn’t even have the kind of carbomb protection that the Chicago Federal building has a couple blocks away.
In an personal note, the Chicago Federal building updated their carbomb barriers after the 9-11 terrorism and they put the old blocks of granite in a vacant lot near where some of my friends, the Dyrsts, live. The Dyrsts got permission from the city to haul off a few of the 3-ton blocks and they just installed them this week in their back yard as retaining-walls. The result is beautiful, but it was so expensive to have the massive blocks moved that nobody else seems to be interested in copying them.