While necessary to refinance national debt, lowering interest rates has a severe side effect: it fuels a "K-shaped" economy. The resulting inflation enriches those who own assets like stocks and real estate while simultaneously punishing wage earners and savers, thus widening the wealth gap.

The primary driver of wealth inequality isn't income, but asset ownership. Government money printing to cover deficit spending inflates asset prices. This forces those who understand finance to buy assets, which then appreciate, widening the gap between them and those who don't own assets.

Kevin Warsh argues that Quantitative Easing (QE) disproportionately benefits the wealthiest citizens. By working primarily through asset price inflation (stocks, housing), it creates significant wealth for the sophisticated investors who understand the central bank's strategy, while the real economy, where most people earn their income, underperforms.

Excessive debt forces governments to print money, which inflates asset prices. This process mechanically enriches the asset-owning class while devaluing currency for wage earners, hollowing out the middle class into either the wealthy or the poor.

There are two distinct economies operating simultaneously. Those with a capital base (equities, real estate) can use financial engineering and leverage to thrive. Meanwhile, individuals relying solely on wages are being crushed by inflation, as their income fails to keep pace with rising costs.

U.S. economic policy is no longer aimed at broad prosperity but at ensuring the S&P 500 index continues to rise. This singular focus creates negative side effects, like suffering for the majority of the population who rely on wage growth rather than asset appreciation.

The core problem for the middle class is a direct chain reaction: national debt leads to money printing (inflation), which forces people to own assets to preserve wealth. Since only 10% of Americans own 93% of assets, the rest are left behind with devalued cash and stagnant wages.

Increasing the money supply doesn't lift all prices uniformly. It flows into specific sectors like finance or real estate first, creating asset bubbles and exacerbating wealth inequality, as those closest to the "money spigot" benefit before wages catch up.

Emergency monetary tools like quantitative easing 'leaked' into permanent use, acting as an 'engine of inequality.' This policy inflated asset prices for the wealthy (the top of the 'K') while hollowing out the middle class (the bottom of the 'K'), creating toxic inequality that directly fuels populist anger and social unrest.