chapter  10
Monetary policy and long-term trends
ByCharles A. E. Goodhart, Philipp Erfurth
Pages 13

There has been a long term downwards trend in the share and strength of labour in national income, depressing both demand and inflation. This has prompted ever more expansionary monetary policies. This chapter explains the process of financial intermediation might be reformed to shift financing more towards equity and away from debt finance, especially in housing. The key difference between the SRM and typical mortgage is that the shared responsibility mortgage (SRM) provides downside protection to the owner if house prices fall. The chapter provides a perspective by focusing initially upon one particular trend in developed countries, which is the trend decline in the adjusted wage share as a percentage of gross domestic products (GDP) in most developed countries since the end of the 1970s. The great financial crisis (GFC) primarily impacted the poor, especially those subject to foreclosure, whereas the countervailing expansionary monetary policy mainly benefitted the rich.