Monetary policy is inherently redistributive. And as I explained in a January article in Forbes, monetary expansion helps Wall Street at the expense of Main Street.
But let’s put the theory to a brief test. Using U.S. data from 1959-2012, I investigated the relationship between changes in the monetary base and changes in employment levels for finance and manufacturing — representing the health of the finance industry and the real economy, respectively.
A simple regression (controlling for other monetary variables such as the federal funds rate and the prime bank rate) showed that each 1 percent increase in the monetary base was associated with a 0.4 percent increase in financial sector employment and a 0.03 percent decrease in manufacturing employment. For the statisticians out there, these results were statistically significant at the 1 percent level.
Of course, this rather simple least squares regression is by no means conclusive. But it sheds some empirical light on an important topic not often discussed in modern debate on monetary policy: the redistributive nature of the printing press.