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America's 1% Has Taken $50T From the Bottom 90%

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Re: America's 1% Has Taken $50T From the Bottom 90%

#331

Post by mixmastamyk »

pmiller2 wrote: post #277
mixmastamyk wrote: post #206

Earlier quoted context omitted.

Federal != Fed, the reserve bank. Close, but not identical.

You are arguing a minor, irrelevant, and largely incorrect point of semantics. > Who owns the Federal Reserve? > The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress. (emph…

You are the only one in the thread who doesn’t appear to understand it.

Re: America's 1% Has Taken $50T From the Bottom 90%

#332

Post by adam_arthur »

adamcstephens wrote: post #314
adam_arthur wrote: post #194

Earlier quoted context omitted.

Especially when coupled with the excessive fiscal stimulus. We should absolutely help those most impacted by the pandemic, but the amount of money being injected amounts to gross negligence. Why were people who made 6 figures and still employed being given checks, for example? The stock market is on fire, and many businesses are smashing earnings expectations, yet we inject another $2 trillion? I've got a sizable por…

Because it’s impossible to tell who lost their job this year even though they made six figures in 2019. If we don’t like accidentally giving people who don’t need it money, claw it back at tax time. edit: the stock market is on fire while small businesses collapse. The market isn’t attached to reality.

Exactly, send the money out today, claw it back from those who earned too much in 2020.

Small businesses collapse, but government efforts haven't been towards helping them, largely more towards sending out helicopter money to the people.

Handing money to people will help all businesses of course, but I'd venture to guess it helped large corporations and brokerages the most.

The loan forgiveness program for small businesses was a good step, but it seemed that a lot of smaller businesses chose not to make use of it.

I'd guess that in the long run, the traditional small business (retail) will become non-viable anyway though. There are too many economies of scale to be gained by operating under the umbrella of a larger corporation. e.g. Amazon can only justify its massive distribution network and same day delivery due to its size.

Re: America's 1% Has Taken $50T From the Bottom 90%

#333

Post by kazen44 »

sjy wrote: post #304
nostrademons wrote: post #228

Earlier quoted context omitted.

Why do you think wages haven't kept up with productivity? The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Fir…

I’d say it probably has something to do with the collapse in union membership, deregulation and growth of the finance sector, and capture of the political system by those who can afford billions of dollars worth of advertising, but it’s a complicated story. Are you suggesting that wages haven’t kept up with productivity because inflation has been consistently high since the US abolished the gold standard?

Also, the massive rise in economic power of the rest of (western) world around that time.

the US was the only major world power left standing after world war 2 without colossal damage, and rebuilding (western) europe took the better part of 25 years to fully complete.

Re: America's 1% Has Taken $50T From the Bottom 90%

#334

Post by brink »

stefan_ wrote: post #318
salmonellaeater wrote: post #232

The framing in the article is ahistorical. The post-WW2 period was a period of exceptionally _low_ inequality. If you look back to just the 1800s there were swings in inequality comparable to the present day. We're now moving back to the historical baseline. There are some contributing factors to the shift in inequality, a major one being that labor is now oversupplied compared to the post-war period, and the competi…

Yeah well the 1800s were also a time where people barely traveled 50kms outwards in their whole life and slaves existed so why on earth would we take that as a barometer for anything.

Because history matters and we shouldn't throw the baby out with the bathwater.

Re: America's 1% Has Taken $50T From the Bottom 90%

#335

Post by tylerhou »

matwood wrote: post #313
tylerhou wrote: post #227

Earlier quoted context omitted.

The Fed is stabilizing the price of the USD because of the coronavirus pandemic. If it were not printing money, then there would likely be a deflationary spiral that would cause a depression. That's one of the reasons why the Great Depression was so bad: the US was on the gold standard at the beginning. The US can't create gold out of thin air, so the USD started deflating, people stopped spending, and capital stoppe…

> The Fed is stabilizing the price of the USD because of the coronavirus pandemic. The pandemic is a case of exactly when the gov. should step in. Unfortunately the gov. is slow and takes so much time to do anything. > That's a distributional issue, and the main solution is tax policy. Exactly. I think a better argument could have been made by looking at the tax cuts a couple of years ago. Companies didn't go on hiri…

CEO bonuses, not always a good thing. Buybacks are not always good (because stock-compensated corporate managers sometimes abuse them to increase the stock price), but for airlines, buying stock was the right choice. You can read Matt Levine's argument, but basically:

If airlines didn't spend money on buying back stock, they could have:

1. Invested it in growth. But if they had invested it in all the normal things an airline might invest in, they would still suffering because of the pandemic.

2. Saved it for a rainy day.

You're arguing (2) should have happened. But an important thing to remember is that companies' savings are not like your savings — companies have far more reliable future cash flow, which means that they can borrow at much lower rates than you can through the equity markets.

If airlines had saved their earnings, maybe they would have grown at bond rates (investing the company's savings in the stock market is too risky and unorthodox for corporate finance officers). That's not good for investors who are looking for 1) return on capital and 2) higher exposure to travel. By returning the capital to investors, airlines increased their exposure to airline-adjacent things and their return on capital. That's a good thing for investors because it gives them more choice! If an investor wants a safer investment, they can create their own basket of bonds and airline stonks.

Similarly, now that the coronavirus has hit, investors know that airlines' fundamentals haven't changed — they're just hitting temporary turbulence. So, to raise capital, airlines can issue stocks and bonds to temporarily get them through 12-24 months. And that's exactly what they did last May: https://www.wsj.com/articles/aviation-industry-races-for-cas...

Basically: corporate finance is not like personal finance, and it's a mistake to think that companies need "rainy day funds." They don't: that's what the equity markets are for.

Re: America's 1% Has Taken $50T From the Bottom 90%

#336

Post by InitialLastName »

afarrell wrote: post #312
tylerhou wrote: post #227

Earlier quoted context omitted.

The Fed is stabilizing the price of the USD because of the coronavirus pandemic. If it were not printing money, then there would likely be a deflationary spiral that would cause a depression. That's one of the reasons why the Great Depression was so bad: the US was on the gold standard at the beginning. The US can't create gold out of thin air, so the USD started deflating, people stopped spending, and capital stoppe…

Agreed. The problem is that the Fed only has the power to inject dollars at the top of the economy, yet sales taxes and the IRS drain dollars from a broad base of the economy. I think an MMO designer would suggest two options: A. Nerf the Fed, which would have the problems you note. B. A balancing mechanic -- Some more universally-accessable way to inject income at the base of the economy.

> B. A balancing mechanic -- Some more universally-accessable way to inject income at the base of the economy.

Something like, for example, giving $1000 to every adult?

Re: America's 1% Has Taken $50T From the Bottom 90%

#337

Post by emit_time »

andrewljohnson wrote: post #266

The top 1% changes a lot. Most people don't stay in the top 1% for many years in a row. Many people below the 90th percentile benefit from the growth of the top levels when they have their brief time in the top 1%.

The reality is it’s not the 1% it’s the 0.1% and 0.01%..

Re: America's 1% Has Taken $50T From the Bottom 90%

#338

Post by mixmastamyk »

pessimizer wrote: post #258
natenthe wrote: post #57

Correction: The Fed's policies have taken $50T of wealth from the Bottom 90%. When you bail out irresponsibly over-leveraged and nearly bankrupted banks and corporations, and pay for those bailouts with tax-payer money, you steal from the poor and give to the rich. Most importantly, when the Fed decides to print money ad nauseam, they create massive asset inflation, which steals from the poor and gives to the rich. T…

A lot of magic is happening in your second paragraph. Inflation reduces debt and wealth at the same time. Wages at the low end rise with the cost of living. Debt and wealth are denominated nominally. The cost of a new car may go up, but the cost of the car you're currently driving (and haven't paid off) is going down. Printing money doesn't steal from the poor. Printing money and giving it to the rich steals from the…

When you own things, i.e. assets, inflation is not really an issue. Of the rich, only lenders are affected by inflation.

Also wages have not been rising enough to counter trends.

Re: America's 1% Has Taken $50T From the Bottom 90%

#339

Post by quickthrowman »

nostrademons wrote: post #285
quickthrowman wrote: post #238

Earlier quoted context omitted.

> When the pandemic is over, it will sell back these bonds the banks it bought them from. This remains to be seen, the market had an absolute fit when they said QE was tapering in 2013, and also had an absolute fit when Powell was raising rates in 2018, particularly in December. The Fed may have painted themselves into a corner here, nothing is certain with regards to unwinding QE or raising rates.

I've heard (from finance professionals) that big elephant in the room is corporate debt. Corporations need to roll over their debt when it comes due, and a fair amount of it is short-term paper. If interest rates rise, that debt will become a lot more expensive, which will make many of the more marginal companies insolvent. Not software companies, which are sitting on hoards of cash, but all of the ordinary manufactu…

Yeah, interest rate risk and increased debt service costs bankrupting companies is a bigger issue than slowing or stopping QE. I hope the Fed can figure a way out of this without hyperinflation, but it’s a distinct possibility. I agree that they’ll wait to raise rates until inflation really starts cooking above 3%.

Re: America's 1% Has Taken $50T From the Bottom 90%

#340

Post by lcc »

ItsMonkk wrote: post #320
brandonr49 wrote: post #21

The problem of inequality in general needs to be framed as one of power asymmetry. There are a handful of people that have managed to garner, through their wealth, similar power to states with millions of people. The solutions to this involve either making money less able to purchase power, or taking some of this money away. I suspect the latter is more likely to happen but I'll happily support either method.

This is exactly how I take it. We thought it was Capitalism vs Communism, but what we learned is you can have Centralized Communism(Cold War Russia) and Decentralized Capitalism(Cold War USA) but it is just as much possible to have Decentralized Communism(Any examples?) and Centralized Capitalism(Current USA). As it turns out it's the Decentralized that's the important part. You need many people making decisions for…

> Decentralized Communism(Any examples?)

Nordic countries? Canada/UK? Though they are socialist, not communist.

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