Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Does QE Cause Wealth Inequality?

lynalden.com

Post reply on HN
Print view View original

21–30 of 287 posts

Re: Does QE Cause Wealth Inequality?

#21

Post by spamizbad »

photochemsyn wrote: post #8

It doesn't necessarily, but there are some issues to think about: 1) Interest rates that are low mean that middle-class savings accounts don't grown in size. QE requires low interest rates as I understand it. 2) MMT is linked to QE but guess what, an oligarchic system isn't going to distribute QE capital to middle class and poor people, it's going to go into the pockets of the ruling class. In any case, you really ca…

I don't understand how higher interest rates on savings accounts would meaningfully impact the middle class.

The median savings account balance is just $5,300[1]. And the thing about savings accounts is that they generally do get spent down periodically - they typically aren't used to continuously squirrel away cash for decades, so you're not compounding interest over the long term. You might save for 5 years and then do a big spend-down to purchase a car, a house, home repair, medical emergency, etc.

So, if the savings interest rate is a paltry 1%, that's just $35. But if it were 5%, it's $265 -- Except now you're paying 1-2 points more on a mortgage, student, and/or car loan. The median household debt is something like $59,000: roughly 10x the amount in savings.

So, you make $230 more in savings interest at the cost of thousands of additional interest payments.

Reducing QE and making debt more expensive seems to benefit a very narrow group of individuals who have the means to store large amounts of cash in safe liquid assets and don't carry significant debts relative to their income. Everyone else is worse off.

[1]https://advisorsmith.com/data/average-savings-account-balanc...

Re: Does QE Cause Wealth Inequality?

#22

Post by acd »

Qe causes all asset prices to rize in value. That include home loans which also expand. Most people loan to these home. Stock assets rize in price. Yet again higher proportion of these assets tends to be owned by richer classes.

Re: Does QE Cause Wealth Inequality?

#23

Post by bennofs »

dageshi wrote: post #11
Ericson2314 wrote: post #6

The thing is we want less stupid speculation and asset bubbles and yet the economy is running far below potential, with the "tight labor markets" right now just a glimpse of how it was before (and probably a fleeting one if the inflation class warriers have their way like in the 1970s). To fix both problems --- because we need to stop just making ourselves poorer and less coordinated with prudish neoliberalism --- we…

I'm still yet to understand how a lot of relatively poorly paid work that probably still needs to be done, gets done under UBI. UBI leads to people not doing particular jobs because sitting at home on UBI with less but enough money is preferable. Which means those jobs have to pay more, which leads to inflation which leads to UBI raising to keep up with inflation... repeat?

I am no economist but couldn't it be that raising pay in few sectors does not cause inflation? I would think that depends on what the people receiving more money spend it on. If they only spend it on things where we have no bottleneck and there is still excess capacity, how would that create inflation? Inflation should only happen if the increased paycheck is used to compete for scarce resources/products. So I think predicting inflation requires a more detailed analysis, especially you need to have a cycle of increased prices and pay.

Re: Does QE Cause Wealth Inequality?

#24

Post by jliptzin »

fdgsdfogijq wrote: post #12

How have people not caught onto this yet? When the Fed prints money, its a guaranteed bet that assets go up. The rich use their wealth and huge amounts of leverage via financial instruments to generate massive returns. This has been going on for a long time. Literally all you need to do is throw your whole bank account into call options. Working a 200k-300k a year job is almost a waste of time with how much money the…

Throwing your whole bank account into call options would be an extremely risky thing to do. But that doesn’t invalidate your point that capital accumulation of wealthy people generally far outweighs any amount of money they would make from their labor. It doesn’t have to be call options though, with enough wealth even interest from T-bills would dwarf a $300k salary.

Re: Does QE Cause Wealth Inequality?

#25

Post by ddorian43 »

fdgsdfogijq wrote: post #12

How have people not caught onto this yet? When the Fed prints money, its a guaranteed bet that assets go up. The rich use their wealth and huge amounts of leverage via financial instruments to generate massive returns. This has been going on for a long time. Literally all you need to do is throw your whole bank account into call options. Working a 200k-300k a year job is almost a waste of time with how much money the…

Yep. Source: I'm long TQQQ.

Re: Does QE Cause Wealth Inequality?

#26

Post by ralusek »

If you increase the amount of USD, the USD cost of anything that isn't USD goes up. So, a lot of the market gains, housing gains, crypto gains, etc, are at least in some part to do with all of these countries increasing their money supplies. So anybody that has wealth kept in anything other than the inflating currencies is going to win, and anybody who either has savings only in fiat or is paid primarily in fiat is going to lose out.

So, yes, of course it causes wealth inequality. The rich can afford to bail on a currency while it balloons.

Re: Does QE Cause Wealth Inequality?

#27

Post by fdgsdfogijq »

Iolaum wrote: post #18
fdgsdfogijq wrote: post #12

How have people not caught onto this yet? When the Fed prints money, its a guaranteed bet that assets go up. The rich use their wealth and huge amounts of leverage via financial instruments to generate massive returns. This has been going on for a long time. Literally all you need to do is throw your whole bank account into call options. Working a 200k-300k a year job is almost a waste of time with how much money the…

Can you elaborate on how one can use call options to make a 200K/year job a 'waste of time'?

The fed keeps printing money and inflating assets. You can generate 200k a year much easier by "risking" it in the markets. You are wasting your life for a pittance that can be made easily in the markets. This is how rich people think, its only the lower classes that somehow think they are being paid a fair wage

Re: Does QE Cause Wealth Inequality?

#29

Post by 88913527 »

When many people have few assets, and few people have many, and you cause the value of assets to go up, the nominal gap between two is larger, but the relative amounts are the same. This is basic math. Suppose we have two individuals who experience 25% growth due to QE:

Person A: $1,000 * 25% growth = $1,250

Person B: $1,000,000 * 25% growth = $1,250,000

Originally, the wealth gap between A and B was 1000:1. It remains 1000:1 after the asset appreciation. However, because wage income has long been stagnant, it becomes increasingly difficult for the poorer person to play catch up, because labor income can't scale in the way capital can. Both the proportional change and real change are worth considering when it comes to setting public policy.

Re: Does QE Cause Wealth Inequality?

#30

Post by Ericson2314 »

dageshi wrote: post #11
Ericson2314 wrote: post #6

The thing is we want less stupid speculation and asset bubbles and yet the economy is running far below potential, with the "tight labor markets" right now just a glimpse of how it was before (and probably a fleeting one if the inflation class warriers have their way like in the 1970s). To fix both problems --- because we need to stop just making ourselves poorer and less coordinated with prudish neoliberalism --- we…

I'm still yet to understand how a lot of relatively poorly paid work that probably still needs to be done, gets done under UBI. UBI leads to people not doing particular jobs because sitting at home on UBI with less but enough money is preferable. Which means those jobs have to pay more, which leads to inflation which leads to UBI raising to keep up with inflation... repeat?

> I'm still yet to understand how a lot of relatively poorly paid work that probably still needs to be done, gets done under UBI.

To flip it around, right now we keep a huge number of people so immerserated they will do all sorts of bullshit for a little wage. Is that a solution?

My personal belief is that there is huge potential technical progress, but it is stuck in the research phase and cannot get to development because with so much weak cheap labor, there is no reason to automate. But with UBI, and people able to say "no, fire me I don't care", that will shift, and suddenly those investments will become valid. I am very excited for that as a programmer.

To restate, Andrew Yang and his ilk have it dead backwards: It's not UBI because unemployment apocalypse, it's unemployment utopia because UBI.

However, say I am dead wrong, and technology doesn't pick up the ball. We might have to cut back on certain luxuries that are no longer affordable. We might also need to "ration" certain un-fun jobs with like a chore rotation --- think civilian 3 years guaranteed service. But this seems good. This is the type of stuff that keeps society honest and fair, and I think will rebuild ties between humans.

Besides these 2 options, the 3rd view is society needs to exploit certain people, hereditary for maximal learned helplessness, to function, and there is no alternative. You can believe that, but you better be honest to yourself if you do.

Post reply on HN