Income growth during the recession

Emmanuel Saez Uneven recovery from the Great Recession

From 2009 to 2011, average real income per family grew modestly by 1.7 % (Table 1) but the gains were very uneven. Top 1% incomes grew by 11 .2 % while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery. From 2009 to 2010, top 1% grew fast and then stagnated from 2010 to 2011. Bottom 99% stagnated both from 2009 to 2010 and from 2010 to 2011. In 2012, top 1% income will likely surge, due to booming stockprices, as well as re timing of income to avoid the higher 2013 top tax rates. Bottom 99% will likely grow much more modestly than top 1% incomes from 2011 to 2012. This suggests that the Great Recession has only depressed top income shares temporarily the dramatic increase in top income shares that has taken place since the 1970s. Indeed, excluding realized capital gains, the top decile income share in 2011 is equal to 46.5 %, the highest ever since 1917 when the series start.

How does this work? Flow says Mish:

Consider the housing boom and bust. By the time easy credit was universally available (with sensible income and down payment requirements flying out the window), the party was nearly over. The root cause of boom-bust cycles (and the associated income inequality distortions) is the Fed's inflationary and reflationary policies. Simply put, the Fed has sponsored bubbles and busts of increasing amplitude over time, and those with first access to cheap money have come out ahead at the expense of everyone else. It's even worse than that. The Fed's policy of "too big to fail" encourages rampant speculation if not outright manipulation in both directions.

His theory, first access to money. Money which is not needed, never gets delivered. It hangs in the accounts of wealthy people and they earn short term gains, then after the regime change at the Fed, it is returned, having done nothing but restore yields to the wealthy. This is what the Fed is think, as DeLong asked, how does the Fed fulfill its legal mandate the top 1% getting first access to the Fed?

  More later, mainly I am wondering why the Fed does this. After all, a bad idea repeated many times sound like a really broken record.  I think it less a Fed problem than a failure of democracy, mainly in the Senate.