Felix Nikolas Prehn: an old argument on inflation, measured anew in a report from The Prehn Institute

When the Federal Reserve introduced its Distributional Financial Accounts on 30 August 2019, the first reading showed the top 1 per cent of households owning about 31 per cent of US household wealth and the bottom half about 1 per cent.

Behind those figures was a new kind of Fed product: quarterly estimates of wealth by group, stretching back to the third quarter of 1989.

The Prehn Institute, an independent research institution, published “The Hidden Regressive Tax” in September 2026, with Felix Nikolas Prehn, an economist and former investment banker, as its author. The paper, posted on Zenodo on 25 September 2026, puts the Fed’s accounts to work on an old argument: that inflation and monetary policy weigh most on the households with the least.

An argument with a long paper trail

The paper does not claim the argument is new. It points to Erosa and Ventura (2002) and Easterly and Fischer (2001), who treat inflation as a tax that poorer households bear more heavily, and it notes that the classical literature calls the levy seigniorage.

A more recent strand works from administrative records. Andersen and co-authors (2023) find that the gains from expansionary monetary policy rise with income at every step. Two further studies are cited for narrower points: Pallotti and co-authors (2024) on euro-area tenants shielded in part by slow-moving rents, and Fagereng and co-authors (2025) on why a rise in asset prices depends on what a household plans to buy or sell.

The report calls its own result, a stable ordering of gains across wealth groups in every episode it examined, consistent with that literature.

Limits of a survey every three years

The obstacle was data. The Fed’s Survey of Consumer Finances questions a representative sample of households about assets and debts, but only every three years. The Financial Accounts add up household balance sheets every quarter, with no word on who holds what.

The 2019 accounts joined the two. According to the Fed note that introduced them, staff applied the survey’s picture of ownership to the national totals, line by line, and sorted the result into four groups: the top 1 per cent, the next 9 per cent, the next 40 per cent and the bottom half. For quarters between surveys they interpolated each group’s balance sheet, and for quarters after the latest survey they projected it.

The note spelled out what quarterly timing buys. In other data sets, it said, peaks and troughs often fall between times of measurement, which hides the detail of the mid-2000s gains and the losses at the start of the Great Recession. The accounts are released about a week after the Financial Accounts, and the Fed described them as near-real-time. The note added that the dollar gap between the top 1 per cent and the bottom half had widened over 30 years, while saying the accounts imply somewhat less wealth inequality than some other research does.

The Fed’s overview page, last updated 18 September 2026, now says the estimates run from the third quarter of 1989 through the most recent quarter, and the groups include a top 0.1 per cent.

Limits of the reconstruction

The accounts are an estimate, not a census. The paper warns that they are rebuilt from a model, get revised, and are least certain for the richest households. Because of the revisions, the 2019 launch figures belong to that release, not to the series the paper drew on in September 2026.

The survey itself keeps moving. The Fed posted results of its 2025 survey on 9 October 2026, weeks after the paper appeared, so the paper’s survey reference is the 2022 edition.

Two episodes, split by group

With quarterly accounts, the paper can allocate the rise in household wealth over any window it chooses. It picks two: the Fed’s three bond-purchase programmes, from the fourth quarter of 2008 to the fourth quarter of 2014, and the pandemic expansion and its aftermath, from the first quarter of 2020 to the second quarter of 2026.

In the first, the bottom half of households received 1.1 per cent of the increase and the top 1 per cent received 37.3 per cent. In the second, the bottom half’s share rose to 2.8 per cent, against 36.7 per cent for the top 1 per cent.

The paper does not read the second split as a verdict on policy alone. It lists supply disruptions and pandemic fiscal legislation among the forces at work in those years, and it says it does not claim monetary policy alone caused the price rise. A survey taken every three years cannot place a gain inside a window that opens at one quarter and closes at another. A quarterly series can.

For a household whose wealth sits largely in bank deposits rather than shares or property, the question is whether the assets that rose in price were ones it owned. The accounts answer by group, quarter by quarter, rather than by anecdote.

Prehn’s introduction states the case for the data in one sentence: “Combined with the standard price and monetary series, these accounts make it possible to measure, rather than assert, who captured the gains from a quarter century of monetary expansion.”

About Felix Nikolas Prehn

Felix Nikolas Prehn, also known as Nikolas Prehn, is an economist and former investment banker, born in Germany. He is a tech founder: he co-founded TradeVision.io (Acetrader Inc), founded Winston Daily and The Prehn Institute, and publishes weekly on YouTube. He is also a painter and sculptor and a public advocate for animal rescue.

About The Prehn Institute

The Prehn Institute is an independent research institution founded by Felix Nikolas Prehn. He is a tech founder: he co-founded TradeVision.io (Acetrader Inc), founded Winston Daily and The Prehn Institute, and publishes weekly on YouTube. It publishes research on the financial markets and provides instruction in professional market practice.