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

41–50 of 287 posts

Re: Does QE Cause Wealth Inequality?

#41

Post by dehrmann »

worik wrote: post #17

Well duh! Print lots of money Give it to people who have lots of money (banks) The rich get richer. What is so hard to understand about that? The powers that be decided that an increase in wealth disparity was a price worth paying to keep economic activity happening (that and inflation, interest rates could well balloon over the next decade). An alternative was to print lots of money and give it to poor people. That…

> The rich get richer.

It depends on if assets appreciate disproportionally more than wages. Remember that poor people have few assets, so they're not getting left behind any more than if there weren't QE. Also remember that the benchmark is actually if there weren't QE. Suppose covid caused a depression because of a lack of Fed intervention. How would people have fared, then?

I have opinion on this either way. My point is that it's complicated and hard to say.

Re: Does QE Cause Wealth Inequality?

#42

Post by jason-phillips »

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'?

I believe he's referring to the widely recognized truism where money printer go brrrrr and stonks only go up.

Re: Does QE Cause Wealth Inequality?

#43

Post by fdgsdfogijq »

jliptzin wrote: post #24
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.

You are still missing the point. With QE, the call options are far less risky than they look. It has been this way for over a decade. People somehow cant get it into their heads, when the fed prints money, assets go up. Capitalists are having an all you can eat buffet while everyone else thinks the only thing they can do is put 3k into the SPY every month. Its a joke

Re: Does QE Cause Wealth Inequality?

#45

Post by kranke155 »

88913527 wrote: post #29

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 remai…

Thomas Picketty - didn’t he show returns on assets far outgain salary growth ?

Re: Does QE Cause Wealth Inequality?

#46

Post by whimsicalism »

fdgsdfogijq wrote: post #27
Iolaum wrote: post #18

Earlier quoted context omitted.

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

The wage of the average professional worker cannot be made "easily" in the markets by someone with the wealth of the average professional worker.

There are a lot of people trying to spread the idea that making tons of money off of the stock market is "easy." My guess is that this is in part encouraged by the market makers. Lots of dumb people who think they can get rich off of options make for good arbitrage opportunities.

Re: Does QE Cause Wealth Inequality?

#47

Post by adventured »

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?

UBI doesn't work under any circumstances. And you don't need it besides. The better managed welfare states of Europe such as Austria, Germany, Finland or Sweden, have already figured out how to operate relatively good systems. No UBI needed.

The approach that will work in the US is a system of income crediting targeted at lower wage workers. And that will still push up their cost of living, for housing and lower priced used vehicles in particular (which will result in the left attempting aggressive rent controls in cities, which will largely backfire).

It's irrational to give everyone a universal basic income. Scale a wage credit for poorer workers and reduce it as you go up the income brackets. Instead of earning $10/hr, it's $15/hr with the credit; instead of $12/hr, it's $16/hr; instead of $15, it's $18/hr. Make the floor $15; shift the federal minimum wage up to $10. Spend the time and money necessary to research what setup - what bracketing - will work best for the present US economy, and then fix it to be adjusted every few years.

It will also put pressure on wages above those workers. It'll ripple through the pay scales. People just beyond the cutoff will be the most unhappy.

* why not shift the minimum wage up to $15? Because if a worker's labor isn't worth $15/hr, they have no place in the labor force. If you use a credit system, their labor may be worth $7-$10/hr, and they can be subsidized up to eg $15/hr or whatever makes sense. A high minimum wage is regressive by comparison, it chops people off at the knees if their labor value isn't high enough.

Re: Does QE Cause Wealth Inequality?

#48

Post by ed25519FUUU »

nprz wrote: post #32
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…

Why buy call options? Why not just buy and hold equities?

Because call options are a form of financial leverage, which is how the rich are getting much richer as the fed prints money

Re: Does QE Cause Wealth Inequality?

#49

Post by sleepysysadmin »

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…

Dont disagree with what you said, but why does the system work like that? It happened when we went off the gold standard. The banks now operate in imaginary terms. The reality is that since it's now imaginary, taxation doesnt exist. It can't exist, in fact the government must now give you money/services in excess of the taxation.

If you aren't rich, you have a net negative taxation. The only people who pay taxes are the people who dont pay taxes, they can pass on the taxation cost to others. It's also why there will be a constant anti-taxation pressure. Why the rich will always be getting a tax cut. The not-rich already dont pay taxes or at least receive more than they pay. The only people who can receive cuts are the rich.

The problem is that to avoid taxation, you put your investments into inflationary immune things. Real-estate, markets, bitcoin. Inflation is what pays for everything. Nobody is paying or even balancing budgets anymore. The only limit there will be inflation keeping the percentages in check. Jeff Bezos or Elon Musk arent billionaires, they simply have significant debt holding inflationary immune.

Re: Does QE Cause Wealth Inequality?

#50

Post by lend000 »

An important takeaway from the wealth inequality chart: every time that wealth inequality has substantially decreased in recent history was during a recession.

Staving off recessions at all costs for political reasons is a horrible policy. Market cycles are natural; we don't live in a perfect world. Market forces clearing out the inefficiencies/rebalancing power in the economy is better for long term capital allocation in society than socializing losses or printing money to rescue stock indices.

Post reply on HN