Economic inequality in America is a problem that is not going away. Even before the COVID-19 crisis wrought havoc on the economy, the disparity between the rich and the poor was at levels not seen since World War II.

Moonshot proposals to curb inequality in America include progressive tax reform aimed at the one-percenters, mass cancellation of student loans, and an overhaul of public education. While these may all be formidable weapons to fight inequality, they have little chance of clearing the necessary political hurdles in Washington.

Without bipartisan consensus, are we doomed to watch idly as the yawning gap between the rich and poor grows dangerously out of control?

As one of the most insightful policy observers in the world, Karen Petrou argues we’re looking for solutions in all the wrong places. In Engine of Inequality, she persuasively takes dead aim at the Federal Reserve as a crucial but unrecognized source of economic inequality and offers meaningful policy proposals that don’t require an act of Congress.

Since the 2008 financial crisis, inequality has been rapidly increasing in no small part because of policies enacted by the Federal Reserve. Monetary and regulatory policy may seem far afield from economic inequality—but who gets the money how is the mission-critical job of central banks such as the Fed, which move money across our financial system. Like it or not, the Fed’s policies have a profound impact on the balance of equality.

Petrou boldly suggests the Fed must pull its head out of the sand. She details the hard data showing how the Fed’s post-crisis policies have unintentionally exacerbated the problem: reliance on aggregate data like Gross Domestic Product (GDP) obscures the economic reality of American families, trickledown programs that rescue financial markets only benefit the rich, ultra-low interest rates impede meaningful savings by the middle class, and others.

Engine of Inequality also reveals several pragmatic actions that the Federal Reserve can and should take immediately to reverse its adverse influence on economic inequality and turn its power to move the money into a force for shared prosperity. Engine of Inequality unveils the powerful financial policy levers that could be pulled to address economic inequality in America and offers a veritable playbook for a more equitable Federal Reserve. Petrou’s proposals are within reach and cut across wealth, racial, and gender divides.

“Petrou’s book uncovers a hidden engine of our skyrocketing inequality: financial-policy. In an accessible and engaging prose, Petrou takes us through the inner workings of monetary policy at the Fed and financial regulations, how they’ve made inequality worse and how they could instead be retooled to take us to a more equitable future. A novel look at the problem of inequality and bold ideas to help resolve it. A must read.”

Emmanuel Saez, Professor of Economics at the University of California Berkeley and author of The Triumph of Injustice

“This book is highly critical of Fed policy and will receive a lot of attention, especially if Fed policy doesn’t work in the coming years.”

Henry Kaufman, President, Henry Kaufman & Company

Karen Petrou, one of the world’s deepest financial thinkers, puts her finger on the proximate cause of the pre- and post-Covid enormous increase in the stock market and associated growth in extreme U.S. wealth inequality. It’s the Federal Reserve’s ongoing No-Cost Lender of First Resort Policy. Her book is a tour de force—brilliant, fundamental, elucidating, and engaging. It’s also a sad story about well-meaning policy boomeranging badly on the middle class.

Laurence Kotlikoff, Professor of economics at Boston University, president of Economic Security Planning, and a New York Times best-selling author

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Media Coverage and Events

Upcoming Events

  • Upcoming Event: April 27, 2021, International Monetary Fund (IMF), Karen Petrou to speak at the seminar discussing her book followed by Q&A.  Details will be posted soon.
  • Upcoming Event: April 29, 2021, RBC Wealth Management seminar/book discussion, Karen Petrou will share her insider’s look at how the Federal Reserve drives economic inequality and a pragmatic playbook for a more equitable central bank.
  • Upcoming Event: July 15, 2021, Karen Petrou is one of the featured speakers at the Washington Bankers Association’s 2021 virtual convention.  More info TBA.

Media Coverage and Past Events

  • The Hill: April 14, 2021, read Karen Petrou’s op-ed: Dimon’s $500 billion proposal opens the door to equitable mortgages.  In his recent note to shareholders, Jamie Dimon includes a startling number: $500 billion more mortgage credit a year would flow if the rules recognized that many lower-income borrowers aren’t also high-risk borrowers. JPMorgan Chase & Co. cares about this in part because it wants to make these mortgages, but we should care about it because we should want JPMorgan and other regulated lenders to provide the urgently-needed loans essential for reversing U.S. economic inequality. Click here to read the op-ed.
  • Podcast: April 5, 2021, Luigi Zingals and Karen Petrou will discuss Engine of Inequality on the Capitalisn’t podcast series. Link to the interview will be posted here when available.
  • Podcast: March 31, 2021,  American Banker, Bankshot, hosted by John Heltman.  John talks to Karen Petrou about her book and Fed’s emergency lending powers.  Listen here (00:11:00)
  • Podcast: March 24, 2021,  Dr. Stephen Pimpare, Principal Lecturer at the University of New Hampshire, will talk with Karen Petrou about her book on the New Books Network podcast series.  Listen here.
  • Read Karen Petrou’s latest op-ed in The Hill on how bad Fed data lead to inequitable policy and key fix-it steps.  Click here to read.  March 23, 2021
  • Past Event: March 17, 2021Exchequer Club,  Karen Petrou will be the featured speaker with Q&A by Richard Hunt, President and CEO of the Consumer Bankers Association (CBA) and the Chancellor of the Exchequer Club. Members only.
  • Podcast: Demetri Kofinas of Hidden Forces speaks with Karen Petrou about how monetary policy and financial regulations have changed in the years since the great financial crisis and how those changes have destabilized financial markets by transferring risk from the more tightly regulated banking sector to other parts of the system. Click here to listen. March 15, 2021
  • Review:  Peter Coy of Bloomberg: Karen Petrou Says Higher Rates ‘Should Be Resolutely Pursued’ and also writes “… Petrou is right that Federal Reserve policies have helped the rich. It’s not so clear, though, that reversing those policies would help the poor. The Fed’s marble headquarters appears under a foreboding sky on the cover of Petrou’s new book, Engine of Inequality.  Read the article here. March 12, 2021
  • Review: New York Times DealBook reviews Engine of Inequality:  As stock markets set new highs, Karen Petrou is mad about monetary policy. Ms. Petrou, co-founder and managing partner of Federal Financial Analytics, a Washington-based consultancy, got so angry that she wrote a book about it, “Engine of Inequality: The Fed and the Future of Wealth in America.” In it, she draws a direct connection between the Federal Reserve’s decisions and the rich getting richer, with others struggling to get by.  Click here to read. March 12, 2021
  • Review: Henry Engler, Senior Editor, Regulatory Intelligence at Thomson Reuters, reviews Karen Petrou’s book, Engine of Inequality. “Forthcoming book by Karen Petrou of Federal Financial Analytics offers some provocative recommendations for U.S. policymakers on bridging the widening income gulf in America.” Read it here. March 11, 2021
  • Read Karen Petrou’s op-ed in American Banker’s BankThink laying out politically-viable ways to level the financial-regulatory playing field and promote economic equality. March 5, 2021
  • Podcast: Anthony Pompliano, host of The Pomp Podcast, talks with Karen Petrou about the Federal Reserve and wealth inequality. Click here to watch the interview. March 4, 2021
  • Watch Karen Petrou and @GeorgeSelgin‘s conversation at Cato Institute’s virtual book forum about her new book Engine of Inequality: The Fed and the Future of Wealth in America.  March 4, 2021
  • Podcast: Hale Report: Inequality and Fed with Karen Petrou
    Lyric Hughes Hale talks to Karen Petrou about her book and research focused on economic policy, especially in regard to banking regulation. The full transcript of this podcast can be found here. March 4, 2021
  • Podcast: Banking With Interest’s Rob Blackwell interviewed Karen Petrou on her book, how the Fed created the “Engine of Inequality” — and how we can fix it. Listen here. March 3, 2021
  • David Brancaccio, Host and Senior Editor, NPR Marketplace Morning Report, interviews Karen Petrou on her new book Engine of Inequality: The Fed and the Future of Wealth in America.  Listen here. March 3, 2021
  • Join Karen Petrou and @GeorgeSelgin for a virtual book forum  tomorrow at Cato discussing her new book Engine of Inequality: The Fed and the Future of Wealth in America.  You can tweet your questions with the hashtag #CatoEcon. March 3, 2021
  • Read Karen Petrou’s Q&A with Matt Peterson in Barron’s talking about her new book Engine of Inequality: The Fed and the Future of Wealth in America.  March 3, 2021