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

221–230 of 287 posts

Re: Does QE Cause Wealth Inequality?

#221

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…

It is reasonable to assert that current asset inflation is due to concentration of wealth generally and COVID stimulation specifically.

Generally as the rich get richer they run out of consumption opportunities and must put money somewhere. They buy assets and drive up the prices.

Here (Aotearoa) COVID stimulation was not given to banks, but consumption opportunities for anybody with money have decreased, hence asset inflation.

We can expect a "correction" if history is anything to go by. It could be a crash (like 1929 or 2008) more likely stagnation in prices and inflation in other sectors (as in the 1970s and 1990s here)

Prediction is hard. Especially of the future

Re: Does QE Cause Wealth Inequality?

#222

Post by Ericson2314 »

ahallock wrote: post #217
wussboy wrote: post #179

Earlier quoted context omitted.

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.

Debt should be for doing interesting things. Like if you are expanding your business. It shouldn't be needed in the steady state. Poor people don't do interesting "events" economically be definition! Truly, to be poor is "stuff happens to you", not "you happen to stuff". The vast majority of people should not need loans.

If we want people to be more "creative" we should achieve that with firstly with more leisure team for hobbies. No faux-entrepreneurship hustle culture. No trying to "acculture the poor" with extrinsic rewards, when rich kids have the luxury of not having the intrinsic rewards beaten out of them. Let people have hobbies. Let people involve their neighbors and pool their UBIs for the bigger-scale ones. Let no one need debt to survive.

We should go "common core" on calculus. The essence to understanding economics right is stocks vs flows, and even if people never learn "this method of solving integrals, they should be able to see a graphed function, and draw it's rough derivative and integral. It's an essential skill. They should also know how to ride bikes and kinesthetically learn this stuff on hills. It is an essential toolkit of thinking, no symbols or formalism needed or wanted.

Re: Does QE Cause Wealth Inequality?

#223

Post by whakim »

Ericson2314 wrote: post #195
whakim wrote: post #138

Earlier quoted context omitted.

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 narrati…

> Really what we need to do is run more big policy experiments at the fed.

I totally disagree with this. Big social policy involves/requires taxation, and a robust debate around what kind of tax regime we want to have in order to support those social policy objectives. The Fed can't collect taxes, and it doesn't involve robust debate because it's not democratic.

Re: Does QE Cause Wealth Inequality?

#224

Post by pedrosorio »

AnotherGoodName wrote: post #129
Iolaum wrote: post #18

Earlier quoted context omitted.

Can you elaborate on how one can use call options to make a 200K/year job a 'waste of time'?

Borrow the maximum you can and invest it. There's very little interest to pay on loans right now and has been for about 13 years now. In the meantime assets have skyrocketed in value. Unless there's a change in policy and a crash is allowed it won't change. Put all the money into old fashion shares and housing. No need to risk it on options or anything like that. Hindsight shows the stock market has more than doubled…

> Borrow the maximum you can and invest it

> Unless there's a change in policy and a crash is allowed it won't change.

And if a crash is allowed, declare bankruptcy, unable to get a mortgage in the foreseeable future and go back to work (with the same income, if you can), right?

Re: Does QE Cause Wealth Inequality?

#225

Post by Ericson2314 »

AnotherGoodName wrote: post #59
dageshi wrote: post #11

Earlier 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?

For the cycle you propose the increase in inflation would have to be equal or greater than the increase in pay. If there's an increase in wages and the increase in inflation in response is lower then there's and effective wage increase despite the inflation. Which is simply the desired outcome. An increase in inflation that matches or outpaces an increase in wages should only happen if wages are 100% of the cost of g…

The current "inflation" thing is not so much due to asset inflation, but due to poor people finally seeing some gains, and the global production capacity still recovering.

Before now, there still was a large amount of QE, and yet little inflation or wage gains. Now, the labor market finally gets tight, bottom half real income goes up, inequality shrinks. But our global supply chains were bred on austerity, tuned to low demand, bean-counter efficient over resilient, and can't keep up.

In particular, your minimum-wage protagonist has a better 2020 and 2021 than 2019.

The current inflation freakout is anti-fiscal- and anti-monitary; it just wants to go back to 2019 and is thus little but evil class warfare, intentionally or not. The right thing to do is to keep the labor tight while finding some completely separate way to discipline the speculation in land, stocks, and crypto (in order of increasing being a farce).

Re: Does QE Cause Wealth Inequality?

#226

Post by xibalba »

whimsicalism wrote: post #86
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…

No comment on the GP, but many of the revolutions you are listing marked the end of feudalism and monarchic rule. I think it is difficult to say now that those were necessarily horrific and needless, without considering the horrors experienced daily under feudal/serf systems. Moreover, the selection of revolutions you have put together seems one-sided. It was revolution that gave people in Britain the vote, it was (a…

> difficult to say now that those were necessarily horrific and needless

The Khmer Rouge killed 1.5 to 2 million (or 25%!!!!) of all Cambodians. Pretty tough to argue that the deaths of 25% of any population is anything but needless and horrific, particularly when you learn about Pol Pot's insane and homicidal policies. Imagine if every 4th person you know were dead in the next 5 years because a guy had a plan to... make our lives better by ruining them indefinitely for some distant vision of Utopia.

The Nazis are truly astronomical in terms of both death count and evil. They successfully created an actual hell on Earth.

Stalin's regime is estimated to have killed 20 MILLION of his own people. I wonder if the murdered would say, "Yeah, but its worth it in the end because no more monarchy!"

Mao's derangements are estimated to have resulted in 45 MILLION dead Chinese. That's 45,000,000. Again, I wonder if their surviving loved ones felt better off? Mom was beaten to death for being "a capitalist", but at least we don't have to worry about that darned monarchy anymore! How would you feel if your Mom was beaten to death? How would you feel if your brother or sister were summarily executed based on an accusation? What if you saw your child needlessly starve to death? These aren't just numbers. These are real human lives extinguished for political ends.

Etc. Etc. Etc.

Your logic is truly deranged. Revolutions are really, really, really bad for everyone, and the vulnerable, weak, and poor are not exempt. Most of them can usually just count on good old fashioned starvation in their near futures as the revolutionaries lurch from one disastrous or insane policy to the next. If they don't starve, there's a good chance the revolution will at some point purify them anyway.

So, I'll point you back to my suggested heuristic.

Re: Does QE Cause Wealth Inequality?

#227

Post by pcbro141 »

nprz wrote: post #32
fdgsdfogijq wrote: post #12

How have people not caught onto this yet? When the Fed prints money, its a guaranteed bet that assets go up. The rich use their wealth and huge amounts of leverage via financial instruments to generate massive returns. This has been going on for a long time. Literally all you need to do is throw your whole bank account into call options. Working a 200k-300k a year job is almost a waste of time with how much money the…

Why buy call options? Why not just buy and hold equities?

I bought AMD Jan 2023 $90 options for $13 earlier in the year when AMD was trading ~$80. So the breakeven price is $103 by Jan 2023 which I found not very risky looking at the accelerating EPS growth.

Look how much I'm up by buying close to the money options instead of buying shares at $80: https://i.imgur.com/vYHl1LY.png

Re: Does QE Cause Wealth Inequality?

#228

Post by certnlyuncertn »

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…

Your scenario is missing the very common case where people have exactly zero assets. If you take that (common) case into consideration it is very clear that both the nominal gap and the relative gap increases.

Re: Does QE Cause Wealth Inequality?

#229

Post by Ericson2314 »

whakim wrote: post #223
Ericson2314 wrote: post #195

Earlier quoted context omitted.

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 narrati…

> Really what we need to do is run more big policy experiments at the fed. I totally disagree with this. Big social policy involves/requires taxation, and a robust debate around what kind of tax regime we want to have in order to support those social policy objectives. The Fed can't collect taxes, and it doesn't involve robust debate because it's not democratic.

> it doesn't involve robust debate because it's not democratic.

Fair.

Let me step back a bit, I do agree the undemocratic fed is ultimately bad. But I also wouldn't want to subsume it to congress in today's state, because FTPT, Senate, and supermajorities are not democratic, and ensure no experiments + tiny overtone window of things where are actually.

I like democracy, but the problem is democracy in its current US form (parliamentary system is better but EU constitution is fucked and causes similar problems) is best at interpolating the options that have been presented. If the democratizing happens with out expanding the "doing" overtone window, it's like 100% exploitation not exploration, and we are also kinda fucked.

It's frustrating because alternative democratic methods would probably be great for experimentation. Highly ideological parliament + independent civil service + sortition for skepticism is an exciting potential brew.

> Big social policy involves/requires taxation

No it actually doesn't, because "potential output" barely exists and to the extent it does we are nowhere near it. We can print money, and if there is inflation we can fix bottlenecks --- like WTF why isn't the port of Los Angelis twice is big by now with tons of extra rail freight capacity?

When there is no obvious benefit, and labor force participation is actually high (vs the headline unemployment rate which is widely acknowledged to be bullshit) then, and only then, do we need to worry about reducing demand across the board with taxes.

Re: Does QE Cause Wealth Inequality?

#230

Post by nverno »

Ancapistani wrote: post #192
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…

> I'd argue that we aren't

It's been a hot-button issue since it was created. If it's characterized as a system run by a bunch of bankers with greedy fingers on the tap, it sounds terrible- if it's a system to stabilize the economy, or any number of its other arguably beneficial purposes, it mightn't sound so bad.

All of this things can be true, but without deep knowledge of the system (does anyone really understand all of the interactions?), it's hard to weigh the tradeoffs and so easy to jump to conclusions. I appreciate the desire for the relative simplicity of things like the gold standard.

Just reading this article has made me reconsider my opinions on the matter (I was pretty certain QE was a primary mover driver of wealth centralization going in). My intuition tells me there is a lot of misleading correlation here, given how interlinked all these systems are.

Post reply on HN