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Does QE Cause Wealth Inequality?

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Re: Does QE Cause Wealth Inequality?

#191

Post by ardme »

Aunche wrote: post #183

It's so sad to see people blame one of the few parts of government still managed by competent people. Blaming the Federal Reserve for things like inflation or wealth inequality is like blaming a cardiac surgeon on side effects of a triple bypass operation. The fault doesn't lie on the expert who needs to resort to increasingly aggressive interventions to maintain some semblance of stability. It lies on the patient to…

Well isn't the issue here that The Fed enables the reckless behavior of congress by sterilizing the deficits?

Yes the root cause is the politicians spending tons of money to get re-elected and running up deficits but they shouldn't be able to get away with it and keep kicking the can down the road.

To your last point - of course it's obvious that interest rates are suppressed and if they were allowed to rise it would cause a depression. But if they were not there would be less mal-investment and the zombie companies propped up by debt would soon collapse. It's not that this wouldn't cause pain in the short term but that you can't just eliminate reality and it's going to happen sooner or later. The longer you delay the worse the ultimate recession might be.

Re: Does QE Cause Wealth Inequality?

#192

Post by Ancapistani »

endymi0n wrote: post #170

TIL that „The Federal Reserve […] is an institution that is mostly privately owned by banks“ Maybe my view is too European on that, but are Americans aware their federal money supervision system is run by banks and how can they possibly be okay with that?

> Maybe my view is too European on that, but are Americans aware their federal money supervision system is run by banks [...]

Honestly, most Americans aren't even aware that monetary policy is a "thing".

> and how can they possibly be okay with that?

I'd argue that we aren't. The US Constitution explicitly gives Congress the power to "coin Money".

The current reading of that phrase is that it only applies to metallic coins, not paper money. Congress then set up the legal structure around the Federal Reserve Bank system - and it's more complicated than "privately owned banks" in practice, due to the blurring of the lines between "public" and "private", and the prescribed structure of the Fed that is at least partially under direct Congressional oversight.

I'll also point out that the US has had multiple monetary systems since its inception, and the Federal Reserve System has only existed for about a century.

Re: Does QE Cause Wealth Inequality?

#193

Post by criddell »

gruez wrote: post #174
criddell wrote: post #131

Earlier quoted context omitted.

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...

https://treasurydirect.gov/indiv/research/indepth/ibonds/res...

Re: Does QE Cause Wealth Inequality?

#194

Post by kardamon »

endymi0n wrote: post #170

TIL that „The Federal Reserve […] is an institution that is mostly privately owned by banks“ Maybe my view is too European on that, but are Americans aware their federal money supervision system is run by banks and how can they possibly be okay with that?

No one knows until they actually investigate it. Calling it the "Federal Reserve" implies that it's part of the government, sort of like the "US Chamber of Commerce".

Allowing a private entity to be in charge of our currency (and collect interest) is absurd.

Re: Does QE Cause Wealth Inequality?

#195

Post by Ericson2314 »

whakim wrote: post #138
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…

I'm not really sure that "mainstream economic theory" genuinely believes or believed that monetary policy alone is a substitute for fiscal policy (in particular, redistribution via taxation - UBIs, capital endowments, equitable investments in education, etc.). I think instead there's a willingness to handwave away all the thorny details of taxation and outsource decision-making to non-democratic institutions (i.e. ce…

I mean, it's hard to say what the mainstream says, especially cause it's the biggest, and currently in a collapsing concensus more empiricism until the storm passes phase.

But I don't think adding more caviets to the bad old stories is going to cut it. People need narratives, and if you say "supply curve up, demand curve down, many astrices" you are biasing a certain simplification when people inevitably need narratives.

Really what we need to do is run more big policy experiments at the fed. The more wild policy swings there are, more more politics feels alive, and better are empiracism is. The micro empiracism today is good but barely econ. (It's sort of abstract social science do a tiny thing and then stats.) The macro empiracism is still frequently quite bad, where better data would help but clearer trends from legit experiments would help even more.

Re: Does QE Cause Wealth Inequality?

#196

Post by iovrthoughtthis »

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…

as is traditional in brief economic analysis, time is not accounted for here.

Re: Does QE Cause Wealth Inequality?

#197

Post by nybble41 »

bradleyjg wrote: post #161
nybble41 wrote: post #58

Earlier quoted context omitted.

The problem being, of course, that those risky investments were considered "risky" for a reason. A fair assessment, in the absence of forced incentives, would say they're more of a net liability than a net asset. Better than having your funds confiscated, perhaps, but otherwise not worth considering. When they fail (as many of them inevitably will) those failed investments result in waste and economic decline , not g…

I wouldn’t say that people are entitled to a safe investment option that offers a decent yield, but on the other hand I’m also skeptical of more than a decade of what was supposed to be extraordinary intervention.

I also wouldn't say that anyone is entitled to a safe investment option, but they are entitled to non-interference—which includes the various rules and regulations which keep people (and especially those with less resources) tied to the US Dollar even as it's diluted at an ever-increasing pace. And without those rules and regulations anything remotely like QE would be a quick route to economic (and political) suicide, rather than the slow-but-inevitable decline we see today.

Re: Does QE Cause Wealth Inequality?

#198

Post by hackingforfun »

criddell wrote: post #193
gruez wrote: post #174

Earlier quoted context omitted.

>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...

https://treasurydirect.gov/indiv/research/indepth/ibonds/res...

This is good to know. I wasn't aware of this website. However, you can't live off of 7.12% on a limit of $10k electronic bonds.

I do wish savings accounts still had high interest rates and there wasn't so much incentive to invest in riskier assets like stocks.

Re: Does QE Cause Wealth Inequality?

#199

Post by baremetal »

whimsicalism wrote: post #162
Clubber wrote: post #149

Earlier quoted context omitted.

>1. If you get higher interest rate returns, how do you think that is being paid for if poor people aren't getting higher rates? Loans to business, home loans, etc. Education loans really weren't a big thing because education used to be subsidized. Also, poor people aren't the only source of ROI on loans. They're quite lucrative though because they seldom are able to pay the principal and are an endless source of int…

Not going to keep responding to someone who is skeptical of the claim that life for the average person is better in 2019 than it was in 1919. Our starting points are so off that I don't think we could have a productive conversation. Take care, believe what you want I guess.

people certainly seem to be eating better and less sedentary in 2019. oh wait..

Re: Does QE Cause Wealth Inequality?

#200

Post by analyte123 »

Aunche wrote: post #183

It's so sad to see people blame one of the few parts of government still managed by competent people. Blaming the Federal Reserve for things like inflation or wealth inequality is like blaming a cardiac surgeon on side effects of a triple bypass operation. The fault doesn't lie on the expert who needs to resort to increasingly aggressive interventions to maintain some semblance of stability. It lies on the patient to…

Read the article! This is discussed in detail, in addition to the effects of USD being a global reserve currency. Most of the commenters here appear to have not read the article.
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