Does QE Cause Wealth Inequality? • Hacker News Board

Re: Does QE Cause Wealth Inequality?

#261

Post by Ericson2314 » Wed, Nov 17, 2021, 3:40 AM UTC

CuriousSkeptic wrote: post #234

Ericson2314 wrote: post #208

Earlier quoted context omitted.

> 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" impl…

Yeah, with money supply I actually was thunking of some vague future approach rather than the current setup. Be that some crypto thing, or the intriguing Sovereign Money[1] proposal. And as for redistribution, I suppose just “printing” money into peoples account would more or less have the intended effect as well. I do suspect a 10% inflation rate would lead to simple logistics costs as the nominal amounts kept chang…

Nice link! Thanks. Very into centralizing the boring parts of banks as a utility like that, and just letting private banks do their funny stuff without captive regular people, but didn't no Iceland was thinking about it somewhat seriously.

Re: Does QE Cause Wealth Inequality?

#262

Post by Ericson2314 » Wed, Nov 17, 2021, 5:06 AM UTC

whakim wrote: post #239

Ericson2314 wrote: post #229

Earlier quoted context omitted.

> 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…

> 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. I agree with you that there are some decidedly undemocratic elements to many "democratic" systems (such as the ones you've mentioned), and to be clear I wish that was not so. But these same demo…

> But these same democratic systems have historically not just expanded the overton window, but exploded it

It seems when the rate of change is endogenously high, things have happened in the US, but now with more stagnation the many veto points strikes harder.

> We can't just print money to the extent that's required for the really big policy changes.

I still disagree.

Free healthcare especially can save money because the current thing is so inefficient --- though in the first few years I expect the backlog of "deferred maintenance" to get in the way.

Unpayed UBI is scarier, but I think we can still try it. There might an awkward adjustment period, but I wouldn't be surprised if it his a new steady state.

> And the US is the most likely to be able to get away with it

Yes

Last thing to consider is the MMT reversal scenario, where the technocrats just worry about reaching "potential", and quantitative stuff ensuring enough spending and taxing, and the politicians decide the qualitative stuff, and also what level of inflation is acceptable -- because it is still a subjective decision somewhat.

In particular, doing a UBI first might be the best way to force higher taxes: people will fight harder to keep their existing UBI than they will to get a UBI in the first place, so with inflation vs loosing it vs more taxes or JG (which is supply and demand of a sort), the latter options might have a better shot.

Re: Does QE Cause Wealth Inequality?

#263

Post by MisterMower » Wed, Nov 17, 2021, 6:35 AM UTC

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?

And perhaps the answer is to make borrowing more costly and saving more profitable through higher interest rates.

Re: Does QE Cause Wealth Inequality?

#264

Post by MisterMower » Wed, Nov 17, 2021, 6:45 AM UTC

sokoloff wrote: post #249

Clubber wrote: post #158

Earlier quoted context omitted.

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 stil…

You’re double counting that $70k. That’s interest on the $1M. Assuming rates stay at 7%, you’d get that $70k every year. You are correct that $70k wouldn’t go as far today due to inflation. But $70k per year was great money in 1996.

Related, my dad and a buddy invested $10k in a CD that yielded 21% back in 1984 I think. If the rates are high enough CDs can be an excellent investment. They’re basically risk free. My bank is offering 0.6% currently. Real rates are very negative right now.

Re: Does QE Cause Wealth Inequality?

#265

Post by MisterMower » Wed, Nov 17, 2021, 6:48 AM UTC

whimsicalism wrote: post #64

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…

> 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 riskier than bank interest. Yes, people investing in productive enterprise is actually better for real output, prices, and generally overall welfare.

Savings does exactly that. You’re money doesn’t just sit in the bank, the bank loans it out to people engaging in economic activity, businesses that want to expand, buy inventory, etc.

Re: Does QE Cause Wealth Inequality?

#266

Post by MisterMower » Wed, Nov 17, 2021, 6:55 AM UTC

whimsicalism wrote: post #113

Clubber wrote: post #103

Earlier quoted context omitted.

>generally impoverished people would rather have lower rates on the debt that they have. Generally impoverished people aren't granted lower rates because of the credit system. They typically pay usury rates. Only people with existing assets / collateral get low rates. >They'd also rather have jobs, which again comes with more investment. Generally impoverished people have shit jobs, that's why they are generally impo…

1. If you get higher interest rate returns, how do you think that is being paid for if poor people aren't getting higher rates? 2. Unexpectedly lower interest rates increase employer competition in the labor market, raising wages. This is well studied. 3. The quality of life of a poor person in the US is unimaginably better than that of someone ranked relatively the same 100 years ago. That is due to investment. Deny…

Help me understand the mechanism for point 2.

Why would lower rates lead to increased competition for labor? Or higher wages?

Increased wages follow increases in productivity. I can see lower rates spurring businesses to invest in equipment that would increase productivity, but the experience over the past decade has been quite the opposite: productivity growth has slowed despite historically low rates.

Re: Does QE Cause Wealth Inequality?

#267

Post by MisterMower » Wed, Nov 17, 2021, 6:57 AM UTC

spamizbad wrote: post #190

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…

Okay, but now you're talking about using monetary policy to change American culture away from consumption and more towards saving. I'm not sure such change is politically sustainable.

And what we have today (steeply negative real rates) is?

Re: Does QE Cause Wealth Inequality?

#268

Post by Rury » Wed, Nov 17, 2021, 8:39 AM UTC

Inequality is innate to our reality. As far as resources go (e.g. land), we live in an anisotropic zero-sum world. Inequality between entities is inevitable in such worlds regardless of economic policy, and becomes more notable as more entities come to exist.

Re: Does QE Cause Wealth Inequality?

#269

Post by raxxorrax » Wed, Nov 17, 2021, 9:16 AM UTC

Probably yes? Poorer people do not have assets and their wage isn't as dynamic to keep up with inflation.

Re: Does QE Cause Wealth Inequality?

#270

Post by raxxorrax » Wed, Nov 17, 2021, 9:24 AM UTC

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 isn't always bad.

I know the mantra of our financial system that creating debt also creates opportunity, but that is certainly detached from reality if used to form a general rule. For a average Joe, debt is exclusively bad. For states? They have more possibilities. But at that point we are talking about completely different forms of debt.