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Does QE Cause Wealth Inequality?

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Re: Does QE Cause Wealth Inequality?

#241

Post by AnotherGoodName »

pedrosorio wrote: post #224
AnotherGoodName wrote: post #129

Earlier quoted context omitted.

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?

I acknowledge the risk and the hindsight. My belief is that with so many playing this game and a precedent of too big to fail any hint at a correction will be met with even more QE to counteract it at this point.

It's a gamble on policy and could go wrong but it does have some thought put into it.

Re: Does QE Cause Wealth Inequality?

#242

Post by whimsicalism »

PeterisP wrote: post #231
whimsicalism wrote: post #116

Earlier quoted context omitted.

Loan it out? What is your real question? I would rather not play Plato to your Socrates in a comment thread.

The point is that your money gets invested in productive enterprise in any case, no matter if it's done through equity financing or credit financing; so if you take out money from your savings account and buy shares then that does not really change the total amount of investment in the economy.

Yes, both of those are increased with lower rates. My point remains exactly the same.

Re: Does QE Cause Wealth Inequality?

#243

Post by xibalba »

whimsicalism wrote: post #232
xibalba wrote: post #226

Earlier quoted context omitted.

> 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...…

> 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. Both of these death estimates are primarily due to starvation (not murder and not the result of violent revolution decades earlier) and are based off of differential…

> Integrated over time

You buried the lede. Death per unit time is extremely important. And yes, huge numbers died of starvation as the result of revolutionary, utopian (and insane and nonsensical) policies. But the starvation deaths were the direct result of the violence and insanity. The two cannot be decoupled. So, I certainly would "count" them. I think most people would.

Is there an argument about how the deaths per unit time went down in those countries post-revolution?

> many of those who died post-revolution would never have even had the chance to be born

I'm not ceding this point, but hypothetically, by your logic, these were just bonus lives whose horrible ends shouldn't count?

> Tens of millions of people die of easily preventable deaths

Yes, this is the default state of nature and thus humanity. Violent, cataclysmic revolution is almost never the best (or even a good) solution. There are limited examples of success, but what sane person would bet their life on it?

I think, fundamentally, the problem with violent revolution is that its leaders are most often ideological zealots who are ill-equipped to lead a nation. They tend to think the same tools that gained them power (violence) will yield effective results in governance. Or, and I think this is a more likely explanation, they are probably just sociopathic, power-crazed murderers.

Re: Does QE Cause Wealth Inequality?

#244

Post by andrewdubinsky »

It's pretty simple to understand.

If I have a money printing machine, the first people to gain will be my friends. The second group will be my friends' friends.

They will go around buying up all the stuff worth having. Pretty soon those items will go up in value. A lot. Anyone outside my circle of friends will quickly find these items very expensive.

Boom. Asset Bubbles.

Re: Does QE Cause Wealth Inequality?

#245

Post by lotsofpulp »

hackingforfun wrote: post #207
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 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.

The QE from multiple times in previous decades should also work to help believe stocks are safe assets. And why wouldn’t it? As long as USA is relatively stable compared to other countries, and USD is desirable relative to other currencies, then I think it is reasonable to consider low cost broad market index funds to be inflation protected savings accounts on a 3+ year investment horizon.

Re: Does QE Cause Wealth Inequality?

#246

Post by fdgsdfogijq »

short_sells_poo wrote: post #130
fdgsdfogijq wrote: post #77

Earlier quoted context omitted.

Probably you are correct. But that illustrates my point even more, I have made absurd amounts of cash by believing in the power of QE and the FED. Its not rocket science, its just accept that the fear mongering of "you are too dumb to use leverage" is false. But I will say, I have had huge returns on QQQ calls. Its working just fine for me to buy LEAPs 10-20% out of the money.

You can certainly make a lot of money on options, but the behavior may be non-obvious to someone who doesn't have experience with them. If you buy a 10% OOM call and the market stays flat, you end up losing the entire investment even though the underlying hasn't moved. Do you know how does that 10% relate to the current implied or realized volatilities, are you actually buying the optimal strikes or have just gotten…

Again, I understand the risks. I about 15xed my starting principal from bottom in march 2020. My approach is to put all of my eggs in one basket and then watch the basket closely. While your post is rational, I can only say that OOM call buying continues to work out extremely well. And thats the point, it goes against every reasonable investing rule, but works extremely well. In some ways it is the truly rational decision to combat wage debasement (precipitated by asset inflation and fed money printing). The typical profile of what is too risky (OOM call buying), simply no longer applies when there is a FED backstop. People need to understand this, as surely many wealthy people and traders in NYC do.

During the last FED meeting, when they double downed on transitory inflation, it was a heavily dovish outlook. Right then and there I went all in, and made a massive profit. The markets continue to hang on their every word, theres no reason to overthink it, when the FED speaks dovishly, believe them and buy calls.

Re: Does QE Cause Wealth Inequality?

#247

Post by fivea »

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…

> Rates are relative, looser money absolutely translates to lower rates, even for poor people. Claiming otherwise is (social) science denial.

This hypothesis presumes that loans are priced exclusively based on cost.

However, all products and services are priced based on willingness to pay, and profit is the delta between cost of delivering it and what customers are willing to pay.

Price gouging runs rampant on credit cards because they are designed to gouge their users. The credit card adoption and payment customer experiences are extremely smooth and free from any resistance to the point where you can pretty much find yourself with a new credit card in your pocket without knowing how. However, avoiding charges and interest payments is extremely hard by design, specially when compared with debit cards. Customers cannot escape these charges, and with low income customers they syphon a relatively large portion of the little disposable income they have.

Re: Does QE Cause Wealth Inequality?

#248

Post by mrep »

dragonwriter wrote: post #105
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?

> 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 does not exist in a vacuum, it replaces means-tested welfare programs which reduce benefits for additional work. It may also replace or reduce minimum wage, UBI proponents disagree rather strongly over whether it should do this; very broadly those most Left UBI supporters stend to oppo…

What do you think of moving medicaid funds to UBI? I ask because I doubt young people will spend their UBI money on health insurance.

Re: Does QE Cause Wealth Inequality?

#249

Post by sokoloff »

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.

If you took $70K to pay taxes and spend every year, your million would slowly dwindle (CD rates were in the 5-6% range)

At 3% inflation, that $70K/yr would lose half its purchasing value in the span of 24 years of your retirement. (It also would cease yielding $50-70K per year over that time as well, but that’s with the benefit of hindsight and you could lock in the rate with a longer term CD at retirement. That still leaves you with half the purchasing power though.)

I don’t think savings accounts have ever been a reasonable way to invest the bulk of your money for future retirement.

Re: Does QE Cause Wealth Inequality?

#250

Post by kbelder »

ruined wrote: post #151
xxpor wrote: post #143

Earlier quoted context omitted.

>they get payday loans and 19% credit cards, or a tent. The rates for those are still lower than they otherwise would be.

payday loan APR is generally around 300% to 700%. this is not a rate set by a market, it is the claw of a predator, useful only to deal a killing blow.

"Can I borrow $10? I'll pay you back $11 next week."

There, you've just committed the sin of collecting 14,000% APR.

You can't compare payday loans to things like mortgage rates or bond returns. It's a market, but it's a very different niche. It's like comparing the cost of mineral water at the grocery star to the cost per gallon of your tap water.

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