Webinar: Dynamics Between Central Banks, Regulators, Investors, and Inequality
As global interest rates have steadily declined over the past decades, many investors have sought yield by migrating up the risk-return spectrum. Major central banks’ response to the COVID-19 pandemic – including continued low interest rates and commitments to purchase a wide range of debt securities – perpetuated these asset allocation trends. While such intervention surely prevented a market crash in March 2020, there is reasonable concern that it also incentivized moral hazard, with yields no longer reflecting underlying risk profiles, and investors buying high-risk assets with the expectation of a central bank backstop. Dynamics have contributed to weak corporate capital structures, fragile financing arrangements for emerging markets, and skyrocketing equity prices even as the prospects for macroeconomic recovery in the aftermath of the pandemic are still uncertain. These impacts in turn exacerbate economic inequality.
In this webinar, Karen Petrou will discuss her new book, Engine of Inequality: The Fed and the Future of Wealth in America, which explores unintended negative consequences of the U.S. Federal Reserve’s policies in this context and how they can increase systemic risks such as inequality, as well as systematic risks for investors and markets. As global indebtedness increases, it becomes more difficult to ever raise interest rates. This in turn makes it much more difficult for asset owners and allocators such as pension funds to meet required returns for their beneficiaries, and it increases wealth disproportionately for those who already own assets relative to those who do not. In this webinar, participants will learn more about these complex issues, how they can contribute to potential solutions, and the book’s vision for financial policy going forward. The implications of this research concern businesses, investors and civil society alike.
Watch the webinar recording at https://www.youtube.com/watch?v=4KQYRNqBJDY