3 ms·

Looking through the history of financial crisis, the end-game is pretty obvious. Short-term, its a win for 401k holders and retirees so politically its an easy

by cubano 10y ago

Looking through the history of financial crisis, the end-game is pretty obvious. Short-term, its a win for 401k holders and retirees so politically its an easy sell. However, sooner or later, all the dollars and yen that the government simply prints to "buy" these securities will cause an inflationary spiral that will lower the standard of living for the working classes, although the bankers and politicians who created the programs will easily dodge those effects due to their wealth and influence. An interesting article on quantitative easing... http://www.ft.com/cms/s/0/031b49ec-c415-11e4-9019-00144feab7de.html http://www.ft.com/cms/s/0/031b49ec-c415-11e4-9019-00144feab7...

runT1ME 10y ago
I disagree that the correct term is 'dodge'. One argument against inflation detractors is that Inflationary growth of the money supply helps those who have debt the most. However, that doesn't end up being the working class, the rich are much more heavily leaveraged into assets that are protected against inflation. Inflation ends up being a wealth transfer from the working class to the rich.
- cubano 10y ago
  > Inflation ends up being a wealth transfer from the working class to the rich. Absolutely, and while my use of the word "dodge" might have been sloppy writing, your analysis of it is spot on. But also, it is almost universally agreed that inflation in the 3-4% range is healthy for an economy, the eventual effect of governments printing money to pay current obligations and/or securities to "prop-up" Wall Street is a much larger rate, like 20%-30% per year Just read the histories of South American government defaults or look at Greece now for a primer on the eventual endgame for out of control debt.
- ArkyBeagle 10y ago
  Deflation ( or low inflation ) works for the rich moreso because who do you think holds all that debt? Mild inflation "ages out" the stock of debt. We think 4% is a good rate of inflation for a recovery ( if a bit low ) but we're unable to maintain even 2%. This is incredibly strongly correlated with wealth inequality.
  - runT1ME 10y ago
    >Deflation ( or low inflation ) works for the rich moreso because who do you think holds all that debt? The...US Government. I do not agree at all 'deflation' works better for the rich. I think you missed the part about being leveraged into assets. That's huge. >but we're unable to maintain even 2% Going by CPI? Take a look at the Dow and RE and tell me inflation is less than 2%.
    - ArkyBeagle 10y ago
      No, you're right - the principal benefactor is the government, but that's pretty weird and unsustainable. Not to mention a massive conflict of interest. Yes, by CPI. I think the rise in real estate is caused by the deflationary nature of the rest of the economy. The Dow? That's just our standard bellwether now.
ArkyBeagle 10y ago
This inflationary spiral has been predicted twelve out of the last three business cycles... deflation lowers the standards of living of wage earners more than inflation.
- cubano 10y ago
  Right...but the thing economists have learned is that these dramatic financial events come pretty much without warning, so saying that because people are predicting it and its not happening yet doesn't mean it won't eventually. The Big Short explained it perfectly...a few forward looking investors made huge bets against MBS while everyone thought they were crazy. It took way longer then expected for the things to come crashing down, but, of course, it did.

by cubano 10y ago

runT1ME 10y ago

I disagree that the correct term is 'dodge'. One argument against inflation detractors is that Inflationary growth of the money supply helps those who have debt the most. However, that doesn't end up being the working class, the rich are much more heavily leaveraged into assets that are protected against inflation. Inflation ends up being a wealth transfer from the working class to the rich.

cubano 10y ago
> Inflation ends up being a wealth transfer from the working class to the rich. Absolutely, and while my use of the word "dodge" might have been sloppy writing, your analysis of it is spot on. But also, it is almost universally agreed that inflation in the 3-4% range is healthy for an economy, the eventual effect of governments printing money to pay current obligations and/or securities to "prop-up" Wall Street is a much larger rate, like 20%-30% per year Just read the histories of South American government defaults or look at Greece now for a primer on the eventual endgame for out of control debt.
ArkyBeagle 10y ago
Deflation ( or low inflation ) works for the rich moreso because who do you think holds all that debt? Mild inflation "ages out" the stock of debt. We think 4% is a good rate of inflation for a recovery ( if a bit low ) but we're unable to maintain even 2%. This is incredibly strongly correlated with wealth inequality.
- runT1ME 10y ago
  >Deflation ( or low inflation ) works for the rich moreso because who do you think holds all that debt? The...US Government. I do not agree at all 'deflation' works better for the rich. I think you missed the part about being leveraged into assets. That's huge. >but we're unable to maintain even 2% Going by CPI? Take a look at the Dow and RE and tell me inflation is less than 2%.
  - ArkyBeagle 10y ago
    No, you're right - the principal benefactor is the government, but that's pretty weird and unsustainable. Not to mention a massive conflict of interest. Yes, by CPI. I think the rise in real estate is caused by the deflationary nature of the rest of the economy. The Dow? That's just our standard bellwether now.

ArkyBeagle 10y ago

This inflationary spiral has been predicted twelve out of the last three business cycles... deflation lowers the standards of living of wage earners more than inflation.

cubano 10y ago
Right...but the thing economists have learned is that these dramatic financial events come pretty much without warning, so saying that because people are predicting it and its not happening yet doesn't mean it won't eventually. The Big Short explained it perfectly...a few forward looking investors made huge bets against MBS while everyone thought they were crazy. It took way longer then expected for the things to come crashing down, but, of course, it did.