Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Does QE Cause Wealth Inequality?

lynalden.com

Post reply on HN
Print view View original

201–210 of 287 posts

Re: Does QE Cause Wealth Inequality?

#201

Post by bigwavedave »

criddell wrote: post #131
Clubber wrote: post #52

Earlier 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.

"For the first six months you own it, the Series I bond we sell from November 2021 through April 2022 earns interest at an annual rate of 7.12 percent. A new rate will be set every six months based on this bond's fixed rate (0.00 percent) and on inflation."

As someone who's never bought bonds before, how do I know the 7.12% won't change after the 6 months of the locked rate to the 0.00% and whatever pittance they decide to toss my way in an attempt to account for inflation?

Sincere question, I don't know anything about anything.

Re: Does QE Cause Wealth Inequality?

#202

Post by pureliquidhw »

keymone wrote: post #169
88913527 wrote: post #82

Earlier quoted context omitted.

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…

now account for $500 cost of living. or $100, which is lower than almost anywhere in the world. A will be broke while B won't even notice.

This is the real issue. Excess cash poured into and competing for assets. Having 90% of your money available to invest vs 10% creates a massive difference in real outcomes.

Re: Does QE Cause Wealth Inequality?

#203

Post by drewvolpe »

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?

It's owned by banks but run by government appointees. Most Americans who watch the news and follow finance understand it's a public-private hybrid structure. As Lyn notes, this isn't unusual. Many national banks are not owned by the government, including Swiss National Bank.

Re: Does QE Cause Wealth Inequality?

#204

Post by analyte123 »

jseban wrote: post #187

I keep reading between the lines that the fiscal policies are incentivising and prioritising innovation and higher education and knowledge work, and getting rid of manual labor by automation or outsourcing. Seems like a good thing, the way she is phrasing it is like a conspiracy by the "elite" that just decided to sabotage a prosperous large working class for no particular reason. Technological advancement must play…

You are reading incorrectly. Her argument is that the fiscal policies are disincentivizing all labor, which indirectly incentivizes industries that have less dependency on labor, whether skilled or unskilled. She also does not phrase it as a conspiracy to sabotage the working class for no reason, she claims that this is a side effect of maintaining USD as the global reserve currency, a system which benefits some people and afflicts others.

Re: Does QE Cause Wealth Inequality?

#205

Post by jimbokun »

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 thought this chart captured the modern economic angst really well:

https://www.lynalden.com/wp-content/uploads/dollar-crisis-in...

Concretely shows how one income used to be able to easily cover a family's expenses.

And how today a one income family is worse off today than 40 years ago in absolute terms.

And how the biggest family cost increase is healthcare, followed by college.

Things that have all been discussed in depth, but clarifying to see them on one simple chart.

Re: Does QE Cause Wealth Inequality?

#206

Post by criddell »

bigwavedave wrote: post #201
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.

"For the first six months you own it, the Series I bond we sell from November 2021 through April 2022 earns interest at an annual rate of 7.12 percent. A new rate will be set every six months based on this bond's fixed rate (0.00 percent) and on inflation." As someone who's never bought bonds before, how do I know the 7.12% won't change after the 6 months of the locked rate to the 0.00% and whatever pittance they dec…

7.12% is about as low as it's been:

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

Re: Does QE Cause Wealth Inequality?

#207

Post by hackingforfun »

nybble41 wrote: post #58
bradleyjg wrote: post #13

Earlier quoted context omitted.

> 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.

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 agree and think the QE from March 2020 only lead people to believe that stocks are safe assets. Then again if The Fed keeps printing, maybe it all just keeps going.

Re: Does QE Cause Wealth Inequality?

#208

Post by Ericson2314 »

CuriousSkeptic wrote: post #181
Ericson2314 wrote: post #125

Earlier quoted context omitted.

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…

So a monthly redistribution of, say, 10% of the money supply as public dividend would take care of that no?

> money supply

Be careful this is a dangerous notion: with today's form of fiat concurrency there is net 0 money!

> redistribution

Likewise the "re" is sketchy. The state can pull money in, and take it out. Keeping those balanced because metal bullion skeuomorphisms is confusing. Our insistence that all money is debt is "double entry accounting fetishism" and also needlessly confusing.

Distribution is good. "re" implies some sort of 0 sum, when the fact that the nominal need not be zero sum, and the future us uncertain and full of possibilities, and this is the true beauty of Capitalism we should embrace even as we are sanguine about all the terrible parts.

The methodology in https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/ler... is much better. The state can print money. The state can destroy money. The state can issue securities. The state should not subscribe to any theory a priori, but simply do the simplest thing the achieve agreed-upon goals, and avoid agreed-upon bad things. Theory can be developed afresh, and with far better empiricism, by basing it on actual experiments of the state trying out different levers and seeing what happens.

Only a wealth of practical experience will overcome the highly politicized disputes. We will never achieve consensus while tiny gamut of the policy space is explored.

-------

That is my long-winded way of saying I (think I agree) agree, but please find a different way to say it :).

Re: Does QE Cause Wealth Inequality?

#209

Post by gremlinsinc »

> The Fed’s role has expanded over the years, and its decisions often seem opaque and arbitrary. A small number of unelected people in a room dictate the price of money for a country of 330 million people, and can create new reserves out of thin air, or destroy reserves from the system.

I'd much rather there be a liquid democracy voting system where maybe every person w/ a degree in economics gets 1 vote, I'd trust 10k economics majors over 10 rich/wealthy bank owners led by the Rothschilds.

Re: Does QE Cause Wealth Inequality?

#210

Post by hackingforfun »

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 think it would be great if cash was a safe option. I.e. the rates offered would be higher than inflation, so that the value of cash is not eroded. QE leads to people investing in riskier assets, treating stocks like a savings account, which to me does not seem right.
Post reply on HN