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Does QE Cause Wealth Inequality?

lynalden.com

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Re: Does QE Cause Wealth Inequality?

#251

Post by dnautics »

Ericson2314 wrote: post #214
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…

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 rough…

> The idea is very roughly that lower interest rates unlock investment which causes them to have jobs.

Let's be honest here, this is just a neoliberal fantasy that amounts to a liberal equivalent of trickle-down:. Enrich the rich and the $ (via "jobs") will make it magically to the Lower classes.

Re: Does QE Cause Wealth Inequality?

#252

Post by isoskeles »

dragonwriter wrote: post #117
hammock wrote: post #110

Earlier quoted context omitted.

FED (in all caps) is a common way to refer to the Federal Reserve, as is the Fed. Don't ask me why.

IME its common in two groups of people: 1. American anti-Fed conspiracy theorists, and 2. Non-Americans who see the #1 without understanding the nature and assume its a standard US usage.

I read ZeroHedge occasionally, and I've never seen it spelled "FED" there. I'm wondering where you find conspiracy theorists who type it like that.

Re: Does QE Cause Wealth Inequality?

#253

Post by ceedan »

jimbokun wrote: post #205
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…

That chart shows median male income and includes the cost of college. Median male income is weighed down by non-college educated men, who are very likely not paying for college.

https://www.bls.gov/emp/images/ep_chart_001.png

Men with a bachelor's degree make a median of 68k/year

Yearly income drops to 52k for men with an associate's degree.

Drops to 47k with some college education.

Drops to 41k with just high school education.

https://en.m.wikipedia.org/wiki/Educational_attainment_in_th...

Re: Does QE Cause Wealth Inequality?

#254

Post by [deleted] »

Ericson2314 wrote: post #222
ahallock wrote: post #217

Earlier quoted context omitted.

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 tea…

[deleted]

Re: Does QE Cause Wealth Inequality?

#255

Post by Aunche »

ardme wrote: post #191
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…

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

Well doctors enable unhealthy people to live unhealthy lifestyles, but nobody blames them for that. They can't just say, "I won't give you blood thinners until you go on a diet." Yes, politicians ought to face consequences, but that is not up to the Fed. It is up to the voters to demand better candidates rather than point their fingers at the Fed.

> 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.

It worked out during the Great Depression because all of our rival powers were completely destroyed by WWII. We won't be so lucky this time. China is poised to overtake the US as the top superpower if our economy collapses. In a couple decades, this might not be the case, as they will be facing severe demographic problems.

Re: Does QE Cause Wealth Inequality?

#256

Post by Aunche »

analyte123 wrote: post #200
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.

I did skim through the article, and don't have any complaints about it. I'm mainly referring to the survey results where 2/3 of her audience believe that the Fed is the primary cause of wealth inequality. The article does refute this, but you shouldn't be blaming this on monetary policy in the first place.

Re: Does QE Cause Wealth Inequality?

#257

Post by Ericson2314 »

dnautics wrote: post #251
Ericson2314 wrote: post #214

Earlier quoted context omitted.

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 rough…

> The idea is very roughly that lower interest rates unlock investment which causes them to have jobs. Let's be honest here, this is just a neoliberal fantasy that amounts to a liberal equivalent of trickle-down:. Enrich the rich and the $ (via "jobs") will make it magically to the Lower classes.

Yes, but sadly the idea is less controversial with rich institutions (who presumably buy much of the treasury bonds) than it is with rich people/households.

Re: Does QE Cause Wealth Inequality?

#258

Post by ItsMonkk »

From Lyn's past article on Japan it is showed that over the past "lost" decades in Japan, the private sector debt has been dramatically reduced while the public sector debt has taken it's place. I really wish she looked into that for this topic.

It's not just the QE, it's not just the lowered interest rates. You need to look at the balance of the money supply compared to the GDP. In America corporate and public debt are ballooning, and that's a direct result of Fed policy. In Japan, even with low interest rates and public debt super high, their money supply is in balance, and so their equality is balanced.

Re: Does QE Cause Wealth Inequality?

#259

Post by hammock »

isoskeles wrote: post #252
dragonwriter wrote: post #117

Earlier quoted context omitted.

IME its common in two groups of people: 1. American anti-Fed conspiracy theorists, and 2. Non-Americans who see the #1 without understanding the nature and assume its a standard US usage.

I read ZeroHedge occasionally, and I've never seen it spelled "FED" there. I'm wondering where you find conspiracy theorists who type it like that.

More kooky places than ZH. Which by the way is not as bad as you probably think it is.

Re: Does QE Cause Wealth Inequality?

#260

Post by JaimeThompson »

hammock wrote: post #259
isoskeles wrote: post #252

Earlier quoted context omitted.

I read ZeroHedge occasionally, and I've never seen it spelled "FED" there. I'm wondering where you find conspiracy theorists who type it like that.

More kooky places than ZH. Which by the way is not as bad as you probably think it is.

"On This “Atom Bomb”- Anniversary, You’re Being Lied To About Hiroshima" was published by ZH. I would say denying that nuclear weapons and nuclear power are hoaxes is a bit off the wall.
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