I hate acronyms that are not spelled out right at the beginning. Just sayin'
QE has been a topic of mainstream news for a good decade now. Just sayin'.
TMBT but FWIT TLA's WHW and EHW but JK.
Does QE Cause Wealth Inequality?
171–180 of 287 posts
Re: Does QE Cause Wealth Inequality?
#172Earlier 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…
Yugoslavia deserves an honorable mention on your list.
Re: Does QE Cause Wealth Inequality?
#173Earlier quoted context omitted.
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 pric…
The best way to achieve that is a negative income tax. If you earn below a certain income you get a payment (not just no tax). That makes it reasonably easy to avoid the "welfare cliff" as you create smaller brackets and slowly move from negative to positive tax rates, likely with a reasonably large band where you neither owe taxes or get a payment. It would need to be combined with government calculating monthly or quarterly payments to avoid feast at tax time and famine the rest of the year.
It would need to come with a strong education on tax brackets and a good online calculator for people to figure out their true income. Way too many people don't understand progressive taxation and think moving up a bracket means they pay a higher rate on all their income, not just the portion that falls into the higher bracket.
Re: Does QE Cause Wealth Inequality?
#174Earlier quoted context omitted.
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…
The Treasury sells savings bonds that are at 7.12% right now. It's not the same thing as a savings account and you can't put a million dollars in, but you can still get a good interest rate on smaller amounts.
>The Treasury sells savings bonds that are at 7.12% right now.
source? yields top out at 2.05% right now. https://www.treasury.gov/resource-center/data-chart-center/i...
Re: Does QE Cause Wealth Inequality?
#175Earlier 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…
I rarely see this spelled out, but in the more modern thinking, the working class are "creatures of flows", and the capitalist class are "creatures of stocks": i.e. the latter has meaningful assets, but the former subsists on wages. Obviously this is just an approximation, but "class is calculus" is a very useful mental model. By that ones, yes, the vast majority of people have negligible liquid savings. So the inter…
Money at rest is not taxed (yet, in the US) and money that flows is. The state is going to promote the flow of money because it means more money flows to them.
Re: Does QE Cause Wealth Inequality?
#176Earlier quoted context omitted.
> 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)
Mortgages in the UK aren't like in the US, even now it's rare to have more than a 5 year fix, meaning you buy a property and, if interest rates go up, and prices crash, you're left on the "standard variable rate" 5 years later, paying 10-15%, leading to repossessions (especially if it happens now after 13 years of 2% mortgages), further dropping prices.
You can't even remortgage onto a new fix if you're unlucky because the crash wipes out your equity, and you owe more than the property is worth, and in the UK you can't even simply hand the keys back.
London average prices went from £80k for an average house price in Jan 1990 and did drop, to £65k by 1992, down 18%. It had recovered to £80k by 1996, and reached £128k by December 1999.
Prices continued to increase until 2008 when they reached a high of £298k in October 2007, before dropping back to £245k, another 18% drop. Prices had recovered to their 2007 peak 5 years later, by April 2012, then continued to inflate up £487k in August 2017, where they've been relatively flat, only increasing 8% in the last 4 years.
Over that 27 year period house prices increased an average 6.5% per year, with most of that 'value' going to those who leveraged their equity and bought properties to rent out in the late 90s and early 00s. That house price inflation wasn't driven from QE though, but from increased ability for people to pay (partly lower interest rates, but mainly because of increased amount of household budget being available to pay rent as more and more families have two full time working professionals, and younger people live in more and more crowded house shares)
Re: Does QE Cause Wealth Inequality?
#177Earlier quoted context omitted.
Consumers buying is what drives production. Not investment. > better [...] prices, and generally overall welfare. How does investment do that? Plenty examples of the opposite can be found. I find those claims baseless.
Investment and low rates drives wages which drives consumption. Investment also shifts aggregate supply to the right, which causes more output.
> Investment and low rates drives wages which drives consumption.
I know this is Economics 101, but is there any evidence that this actually happens in practice?
Re: Does QE Cause Wealth Inequality?
#178Earlier quoted context omitted.
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 pric…
The best way to achieve that is a negative income tax. If you earn below a certain income you get a payment (not just no tax). That makes it reasonably easy to avoid the "welfare cliff" as you create smaller brackets and slowly move from negative to positive tax rates, likely with a reasonably large band where you neither owe taxes or get a payment. It would need to be combined with government calculating monthly or…
> That makes it reasonably easy to avoid the "welfare cliff" as you create smaller brackets and slowly move from negative to positive tax rates
NIT, in the idealized form (which is exactly a UBI + income tax system) always has positive marginal rates (its semi-realization in the US EITC does have negative marginal rates over some ranges, which brings back—or exacerbates, since EITC coexists with other welfare programs which also have cliffs—the welfare cliff effect.)
Re: Does QE Cause Wealth Inequality?
#179Earlier quoted context omitted.
That's the logical hypothesis, but the article we're commenting on seems to show that it's more complicated. FTA: "The logical case for why the Fed’s activities cause wealth concentration is that low interest rates and high levels of QE tend to boost asset prices, such as stocks and real estate, which are primarily owned by the wealthy. By making homes and stocks more expensive and unaffordable, it widens the wealth…
It seems like many people in this thread are missing that poor people are often underwater in debt, so lower rates help them. There is a reason most of the farmer uprisings in the early US were over wanting more inflation rather than deflationary policy that made the value of their debt payments higher.
Maybe the more meaningful question is, "Why are poor people often in debt?" And how would we address that?
Re: Does QE Cause Wealth Inequality?
#180Earlier quoted context omitted.
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 pric…
Why is it irrational? in a way it is creating liquidity (the additional funds will be spent in different ways by those in different socio-economic groups). Why does there need to be a cut-off the whole point of it being Universal for it to work, there should not be anyone just above the cut off as its in addition to their existing salary, this is a problem that exists in the current welfare states, where those earning just above cutoff earn similar to those on welfare.