Does QE Cause Wealth Inequality?

Post by sokoloff » Tue, Nov 16, 2021, 6:51 PM UTC

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…

Post by whimsicalism » Tue, Nov 16, 2021, 6:52 PM UTC

Clubber wrote: post #103

whimsicalism wrote: post #89

Earlier quoted context omitted.

> 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.

>generally impoverished people would rather have lower rates on the debt that they have. Generally impoverished people aren't granted lower rates because of the credit system. They typically pay usury rates. Only people with existing assets / collateral get low rates. >They'd also rather have jobs, which again comes with more investment. Generally impoverished people have shit jobs, that's why they are generally impo…

Post by notahacker » Tue, Nov 16, 2021, 6:53 PM UTC

88913527 wrote: post #82

nly wrote: post #57

Earlier quoted context omitted.

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…

Post by dragonwriter » Tue, Nov 16, 2021, 6:53 PM UTC

hammock wrote: post #110

dragonwriter wrote: post #88

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> the FED “Fed” ( Fed eral Reserve), not “FED”.

FED (in all caps) is a common way to refer to the Federal Reserve, as is the Fed. Don't ask me why.

Post by cies » Tue, Nov 16, 2021, 6:55 PM UTC

bradleyjg wrote: post #13

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…

> QE requires low interest rates as I understand it. It’s the other way around. QE lowers interest rates; that’s the main purpose. The idea is that low interest rates force investment in risky ventures (since safe ones are offering low yields) and those risky investments on net will generate excess economic growth.