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Does QE Cause Wealth Inequality?

lynalden.com

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Re: Does QE Cause Wealth Inequality?

#81

Post by Ericson2314 »

xibalba wrote: post #54
Ericson2314 wrote: post #15

Earlier quoted context omitted.

The mainstream economic theory genuinely believed that handing out central bank securities would work just as well as, say. adjusting a UBI or normal fiscal policy. Yes, it's a suspiciously convenient idiocy --- especially because they also think wealthy households spend less (even if they don't think wealthy bussinesses do something similar) --- so certainly it's not something that can be completely fixed without a…

> revolution Revolutions almost always result in prolonged mass violence. Most often of the horrific, needless, and soul shattering kind. A sampling of recent revolutions: the Bolshevik Revolution, the French Revolution, Cambodian civil war/Khmer Rouge takeover, Nazi takeover of Germany, Chinese Communist Revolution, the Cuban Revolution, etc etc. I propose a new heuristic for my fellow HN'ers: if someone pines for r…

Should I do a :D and /s? I obviously don't want more pandemics and bloody revolution --- I am sure I will be the one getting guillotined, for one.

The best case --- if it works --- is "non-reformist reform" as the European social democracies were planning. Some Marxists think it was doomed to fail because you can't avoid the antagonisms. I think they were merely prudish about printing money (especially Germans), and if drank more Post-Keynsian kool-aid (and let in more immigrants not as an underclass like in America), we would all be Socialist already.

Re: Does QE Cause Wealth Inequality?

#82

Post by 88913527 »

nly wrote: post #57
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…

Compounding returns makes growth exponential. When you look at it that way the rich guy is just further up the curve, but you're on the same trajectory. In your simple example (25% returns annualised) he's only 31 years ahead! Don't you just feel better now?

Let's do the math for compounding returns. Suppose 7% growth for 30 years, same Person A and B:

$1000 * (1.07 ^ 30) = 7,612.25

$1,000,000 * (1.07 ^ 30) = 7,612,255.04

Proportionally, It's still 1000:1. So we see compounding doesn't change the relative difference. But now we're getting to absolute gap that's simply uncoverable by wage income, unless you can land in the professional management class, which effectively sets its own wages (board members voting for compensation packages for one another).

Re: Does QE Cause Wealth Inequality?

#83

Post by trutannus »

hammock wrote: post #4
trutannus wrote: post #2

The author took way too long to introduce what the abbreviation QE in this context means. It's only in the 5th paragraph. It's generally not a great idea to use an unclear acronym in the title. If you really must, at least do the reader the curtesy of defining it up front, rather than making them dig for it. To someone who's non-American and likely does not keep an eye on the FED, QE isn't likely going to be they way…

If you don't already understand what QE in this context is, it is unlikely you will be able to fully understand the rest of this article.

You can know what Quantitative Easing is without immediately recognizing QE out of context in a title.

Re: Does QE Cause Wealth Inequality?

#84

Post by throw0101a »

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…

Piketty on Góes's IMF paper:

> Piketty's response[55] noted, however, that Góes used measures of income inequality rather than wealth inequality, and inappropriately took the interest rate on sovereign debt as his index of the rate of return on capital, which makes his results not commensurate with those of Piketty's study.

* https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

[55] FR: https://www.lesechos.fr/2016/09/thomas-piketty-repond-a-letu...

Re: Does QE Cause Wealth Inequality?

#85

Post by trutannus »

vishnugupta wrote: post #9
trutannus wrote: post #2

The author took way too long to introduce what the abbreviation QE in this context means. It's only in the 5th paragraph. It's generally not a great idea to use an unclear acronym in the title. If you really must, at least do the reader the curtesy of defining it up front, rather than making them dig for it. To someone who's non-American and likely does not keep an eye on the FED, QE isn't likely going to be they way…

Those who typically visit Lyn Alden’s blog and follow her news letter (as well as her target audience) already know what QE stands for. Besides, now a days with fed so much in the news I suspect it’s becoming widely known which is a good thing.

Yes, that makes sense for those in the US, but the FED does not really factor into the thinking of, for instance, a German. The argument of "if you read the blog you know what it means" somewhat falls flat when the link is posted on HN for people who don't already read the blog to see. Quantitative Easing isn't just an American thing, and plenty of Germans might know it as Quantitative Easing, but have never seen it called QE for various reasons (it's QL in German for sake of example).

Re: Does QE Cause Wealth Inequality?

#86

Post by whimsicalism »

xibalba wrote: post #54
Ericson2314 wrote: post #15

Earlier quoted context omitted.

The mainstream economic theory genuinely believed that handing out central bank securities would work just as well as, say. adjusting a UBI or normal fiscal policy. Yes, it's a suspiciously convenient idiocy --- especially because they also think wealthy households spend less (even if they don't think wealthy bussinesses do something similar) --- so certainly it's not something that can be completely fixed without a…

> revolution Revolutions almost always result in prolonged mass violence. Most often of the horrific, needless, and soul shattering kind. A sampling of recent revolutions: the Bolshevik Revolution, the French Revolution, Cambodian civil war/Khmer Rouge takeover, Nazi takeover of Germany, Chinese Communist Revolution, the Cuban Revolution, etc etc. I propose a new heuristic for my fellow HN'ers: if someone pines for r…

No comment on the GP, but many of the revolutions you are listing marked the end of feudalism and monarchic rule.

I think it is difficult to say now that those were necessarily horrific and needless, without considering the horrors experienced daily under feudal/serf systems.

Moreover, the selection of revolutions you have put together seems one-sided. It was revolution that gave people in Britain the vote, it was (at least partially) revolution that ended apartheid in South Africa and white minority rule in much of Africa writ large, etc. etc.

Re: Does QE Cause Wealth Inequality?

#87

Post by AnimalMuppet »

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…

> Interest rates that are low mean that middle-class savings accounts don't grown in size.

So far as I recall, interest rates on savings accounts have never been greater than inflation. That is, the money stored in a savings account would not grow in real terms. That's true with or without QE.

Re: Does QE Cause Wealth Inequality?

#88

Post by dragonwriter »

trutannus wrote: post #2

The author took way too long to introduce what the abbreviation QE in this context means. It's only in the 5th paragraph. It's generally not a great idea to use an unclear acronym in the title. If you really must, at least do the reader the curtesy of defining it up front, rather than making them dig for it. To someone who's non-American and likely does not keep an eye on the FED, QE isn't likely going to be they way…

> the FED

“Fed” (Federal Reserve), not “FED”.

Re: Does QE Cause Wealth Inequality?

#89

Post by whimsicalism »

Clubber wrote: post #72
whimsicalism wrote: post #64

Earlier quoted context omitted.

> 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.

It's certainly good for the shareholders to have more money in the market, I'm not sure about the others. I know I'd much rather have a solid 6-7% interest return than a flaky market return.

> I know I'd much rather have a solid 6-7% interest return than a flaky market return.

And college debt holders, mortgage holders, generally impoverished people would rather have lower rates on the debt that they have.

They'd also rather have jobs, which again comes with more investment.

They'd also like to have a higher quality of life, again which comes with more investment in capital/production/real output.

Re: Does QE Cause Wealth Inequality?

#90

Post by trutannus »

ffggvv wrote: post #10
trutannus wrote: post #2

The author took way too long to introduce what the abbreviation QE in this context means. It's only in the 5th paragraph. It's generally not a great idea to use an unclear acronym in the title. If you really must, at least do the reader the curtesy of defining it up front, rather than making them dig for it. To someone who's non-American and likely does not keep an eye on the FED, QE isn't likely going to be they way…

pretty sure if you follow their blog then you're pre-supposed to already have an interest in finance. and therefore should know the basic concept of QE. It's like expecting a programming blog to explain a for loop. not sure its the authors fault it got posted here

I think you can know what Quantitative Easing is, without realizing what QE means. Even advanced research journals read by scientists only will do something like this: Quantitative Easing (QE) in the opening. For the point that she had no idea it would be posted here, you're correct, but stuff like this does not help pick up new readers. My first thought was this was going to be about some sort of equity investment system, like Private Equity, also called PE.
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