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Does QE Cause Wealth Inequality?

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Re: Does QE Cause Wealth Inequality?

#61

Post by Der_Einzige »

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?

Yeah, that's kind of my thought here too. It honestly feels like the only reliable way to make huge stacks of money with calls/puts is knowing stuff that ought to qualify you as an "inside trader".

Re: Does QE Cause Wealth Inequality?

#62

Post by short_sells_poo »

fdgsdfogijq wrote: post #34
nprz wrote: post #32

Earlier quoted context omitted.

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

Why settle for 20% returns when you can get 500% returns? Only the lower classes are so risk averse. The rich understand that QE essentially strips risk from the markets

You can do the same with levered ETFs or futures, if you want to be levered to the hilt, at least do it with instruments where you don't run the risk of ending up losing everything even if the equities go up.

Re: Does QE Cause Wealth Inequality?

#63

Post by WalterSear »

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 isn't unemployment. Less desirable jobs won't need to pay more: income will be in addition to UBI.

The only jobs that will need to raise their wages are those that were exploitative to begin with: the ones that rely on people not even having the resources to seek better work.

Re: Does QE Cause Wealth Inequality?

#64

Post by whimsicalism »

Clubber wrote: post #52
spamizbad wrote: post #21

Earlier quoted context omitted.

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 the…

You get what you incentivize. We are currently incentivizing debt over savings, so that's what we get. When I was in college, the bank would give something like 6-7% on savings. If I had a million dollars in the bank I could comfortably live off that interest for life. Now if I put a million dollars in the bank, I lose wealth due to inflation, so I'm incentivized to put it in a fund or something now, which is a lot r…

> Now if I put a million dollars in the bank, I lose wealth due to inflation, so I'm incentivized to put it in a fund or something now, which is a lot riskier than bank interest.

Yes, people investing in productive enterprise is actually better for real output, prices, and generally overall welfare.

Re: Does QE Cause Wealth Inequality?

#65

Post by worik »

dehrmann wrote: post #41
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 po…

Really? Wages are spent so to not depreciate.

Those that use debt to buy assets, hence face interest costs, could suffer terribly if interest rates outpace the value of their assets. An asset price crash would burn then badly (as happened in London property market, if memory serves, in the 1990s)

Re: Does QE Cause Wealth Inequality?

#66

Post by creato »

lend000 wrote: post #50

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 allocati…

I agree that maybe allowing market downturns to occur is probably a good thing.

That said, an equally reasonable interpretation of your observation is that maybe inequality is not itself a problem. More inequality doesn't necessarily mean that the poor are worse off than they would be with less inequality.

I wonder if we are collectively making a mistake to treat stock ownership as wealth. Stock prices going down reduces wealth inequality, but does that actually help anyone?

Re: Does QE Cause Wealth Inequality?

#67

Post by kranke155 »

bhupy wrote: post #55
kranke155 wrote: post #45

Earlier quoted context omitted.

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

That was his thesis, but it's since been questioned/refuted: https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf > Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g. https://www.economist.com/briefing/2019/11/28/economists-are... http://davidsplinter.com/AutenSplin…

I am not familiar with any complete refutation of his work. Some questions here and there

Re: Does QE Cause Wealth Inequality?

#68

Post by whimsicalism »

lend000 wrote: post #50

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 allocati…

Is inequality the base thing we care about? Or is it only an instrumental way of accessing overall welfare, which is the thing we actually care about?

If the latter is true, it seems like causing recessions in order to reduce inequality is at least somewhat akin to to cutting off the nose to spite the face.

Re: Does QE Cause Wealth Inequality?

#69

Post by Ericson2314 »

lend000 wrote: post #50

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 allocati…

It's massively taken off during the lost previous 10 years horrible recovery. Read https://www.employamerica.org/ or Roosevelt interest stuff for why it's essential to have tight labor markets solve these problems --- more essential than ending all speculation.

The fact that the last 10 years were exceptionally weak labor markets and yet lots of speculation shows that the two are less coupled than people might think. There it was bad, but that doesn't mean the decoupling can't also work for good. The solution is:

1. Bboost demand enough so labor markets are tight -- and today "inflation" is not a problem but rather the result of trying to run a shitty poor-repair material economy that has gotten too use to low demand and cheap later. Whenever there is a recession, boot UBI, or run a job guarantee doing all that feel good low-intensity stuff. It's not like we are low on work to be done with global warming!

2. With the business cycle now constrained to merely be a speculation cycle (real people get fed regardless), think of new creative ways to go after that. For example, when there is too much speculation, limit financial assets as collatoral for loans. No more bitcoins as collateral for loans to pay for the the mining electricity in times like this. But maybe shit like that is OK in other times.

Re: Does QE Cause Wealth Inequality?

#70

Post by nly »

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…

When the tide turns you'll get fucked fast following this strategy
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