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Does QE Cause Wealth Inequality?

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Re: Does QE Cause Wealth Inequality?

#211

Post by Ericson2314 »

throwaway0a5e wrote: post #172
xibalba wrote: post #54

Earlier quoted context omitted.

> 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.

Tito is pretty dope though as these regimes go though. https://en.wikipedia.org/wiki/History_of_computer_hardware_i... is also neat.

Re: Does QE Cause Wealth Inequality?

#212

Post by [deleted] »

Clubber wrote: post #158
sokoloff wrote: post #111

Earlier quoted context omitted.

Was there ever a time where a savings account of $1M both provided a livable income over many decades and didn’t lose value to inflation? What were inflation rates while savings rates were 6-7%?

Sure, say I had $1M in the bank in 1996, it would yield ~$70K which would provide a comfortable living situation both then and today. Inflation was around 2-3%, which is generally the target. >lose value to inflation Inflation always erodes money of course, so there was never a time when that didn't happen when there was inflation.

[deleted]

Re: Does QE Cause Wealth Inequality?

#213

Post by rndmind »

theonlybutlet wrote: post #186
rndmind wrote: post #150

Quantitative Easing will continue on until all the boomers are happily retired. Give it another 3-6 years, then the Fed is going to "get religion" and you will want to hold hard assets. Until then... its stocks and crypto on a moon mission.

Why do you say 3-6 years, I'm curious?

I'm actually borrowing that from a podcast I listened to, [ a really good listen here, yewtu.be/watch?v=YyprUlzIpog he mentions this point at 20 minutes 10 seconds ... ]

He surmises that the government will encourage the FED to preserve QE until the baby-boomers are finally set and retired. Then the FED will 'get religion' and taper down

Re: Does QE Cause Wealth Inequality?

#214

Post by Ericson2314 »

ruined wrote: post #136
whimsicalism wrote: post #94

Earlier quoted context omitted.

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.

poor people don't get lower rates. they get payday loans and 19% credit cards, or a tent. inflation is "good" for debts if your budget is otherwise balanced and your income rises apace, but if either is not the case inflation will only depress purchasing power. historical farmer revolts were interested in higher inflation because they had land, a real asset, and sold crops, real commodities, that provided appropriate…

Farmers needed loans to get them between harvests, and those were also quite usurious. The land was in relative abundance (even with the "end of the frontier"), so it's not like it was the sort of anchoring asset that middle class home-ownership today is crocked up to be.

But you are right that poor assets or debts are not enough to explain how interests rates are supposed to help or hurt them. The idea is very roughly that lower interest rates unlock investment which causes them to have jobs.

The traditional first approximation is regular people live entirely off income and have no meaningful assets or debts, and rich people don't work and just have assets and debts, live off profits/dividends, or even just loans with their appreciating assets as collateral. It is "class as calculus" as I wrote more about in another comment.

Re: Does QE Cause Wealth Inequality?

#215

Post by lkbm »

Clubber wrote: post #158
sokoloff wrote: post #111

Earlier quoted context omitted.

Was there ever a time where a savings account of $1M both provided a livable income over many decades and didn’t lose value to inflation? What were inflation rates while savings rates were 6-7%?

Sure, say I had $1M in the bank in 1996, it would yield ~$70K which would provide a comfortable living situation both then and today. Inflation was around 2-3%, which is generally the target. >lose value to inflation Inflation always erodes money of course, so there was never a time when that didn't happen when there was inflation.

The question is whether the inflation exceeds interest. With index funds it generally doesn't, but I'm not sure about a savings account. Right now inflation easily beats a high interest savings account, but I'm not sure about 1996.

Re: Does QE Cause Wealth Inequality?

#216

Post by Ericson2314 »

whimsicalism wrote: post #146
ruined wrote: post #136

Earlier quoted context omitted.

poor people don't get lower rates. they get payday loans and 19% credit cards, or a tent. inflation is "good" for debts if your budget is otherwise balanced and your income rises apace, but if either is not the case inflation will only depress purchasing power. historical farmer revolts were interested in higher inflation because they had land, a real asset, and sold crops, real commodities, that provided appropriate…

> poor people don't get lower rates. they get payday loans and 19% credit cards, or a tent. Rates are relative, looser money absolutely translates to lower rates, even for poor people. Claiming otherwise is (social) science denial. > modern poor people generally have zero assets. Poor and lower class people are often deeply in debt. Many poor people will even have homes with very large mortgages outstanding, and with…

Poor people don't have mortgages. In a non-shit city they shouldn't even have cars (a depreciating asset won't do them any good).

Pay check to pay check can mean literally that. Money comes in, money goes out. There is no buffer. UDP not TCP life :D.

Re: Does QE Cause Wealth Inequality?

#217

Post by ahallock »

wussboy wrote: post #179
whimsicalism wrote: post #94

Earlier quoted context omitted.

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?

Debt isn't always bad. It's a powerful tool (leverage), and bankruptcy shouldn't have a stigma.

We need people to be financially educated. We teach calculus in schools but very little on finance. Perhaps that's changed since I was in high school, but for me, it was non-existent.

Re: Does QE Cause Wealth Inequality?

#218

Post by Ericson2314 »

ruined wrote: post #165
xxpor wrote: post #156

Earlier quoted context omitted.

A lot of states have capped those rates relative to prime.

which simply reinforces the idea that it's not a market. credit cards, too, are generally capped. the rate always maxes out the legislated cap. so it's not really dependent.

Yes the market power is also one sided, capping the rate also doesn't really help without guaranteeing more access to credit.

The best thing is:

a) UBI, just hand out a tiny bit of money to make poor people more liquid, because liquidity kills, not insolvency

b) postal banking, because even shittier than a payday loan is high fee check cashing without a pretense of debt!

Poor people hopefully at the point can save up a paychecks worth of buffer in their bank account, and don't need postal bank loans to replay payday loans.

Re: Does QE Cause Wealth Inequality?

#219

Post by worik »

iso1631 wrote: post #176
worik wrote: post #65

Earlier quoted context omitted.

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 becau…

I was ten years out by memory!

Thanks for that

Re: Does QE Cause Wealth Inequality?

#220

Post by WalterBright »

hammock wrote: post #102
WalterBright wrote: post #98

This reminds me of when after WW2 ended in Germany, the old German Mark was repudiated and became worthless. It was replaced with the new Mark, and every German was given the same number of new Marks to jump start the economy. Within a week, the people who had money before the repudiation had money again, and the people who didn't didn't.

Anywhere to read more about this?

I heard it from people who lived through it. They're all dead now. Wish I had a better reference.
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