Capitalist woes

The US Federal Reserve, the Bank of England, and the European Central Bank's policies of low interest rates have increased economic inequality across the West, made the rich richer, and hurt pensions, according to Citi Research analyst Hans Lorenzen. "The damage caused to the system isn't worth the benefit," he wrote.

The argument works like this:

1. Central banks pumped a huge amount of cheap cash into the global economy nearly ($20 trillion)

2. That cash has inflated valuations of stocks.

3. The rich were the primary beneficiaries, but they saved rather than spent so it had little effect on wages.

4. Low interest rates have hurt pensions, making them more expensive for corporations to fund.

5. That, in turn, has reduced corporate investment in capital expenditures.

6. Investment is also unattractive because the deflationary environment features low returns and low productivity.

7. So instead of borrowing to invest, European companies have focused on cutting costs.

8. And US companies have used the money to buy back their own shares, mostly helping the rich.

9. None of the above has created jobs or boosted wages.

Most of the growth in equities has ended up — predictably — in the hands of the rich. It did nothing for wages. "QE gains end up in hands with lowest propensity to spend," Lorenzen says

Lorenzen argues, low interest rates hurt pensions, forcing companies to reduce their capital-expenditure investment and divert more money into plans

But if debt is so cheap, why aren't companies borrowing, spending, and investing? The answer is deflation. When prices are falling and productivity is low there is no point in investing if you can't make a decent return. So companies in Europe are focusing on cutting costs (which doesn't create jobs or drive wages). Whereas companies in the US are focusing on share buybacks (which help the rich)