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Where is the evidence of this wealth transfer? That just seems like the same old mistake of thinking that wealth is zero-sum. Isn’t most of this stock market g

by cactus2093 6y ago

Where is the evidence of this wealth transfer? That just seems like the same old mistake of thinking that wealth is zero-sum. Isn’t most of this stock market gain from new wealth that is being created? Much of it goes to people wealthy enough to own stocks, but if it’s new wealth that’s not a wealth transfer, plus not all of it does. Companies with higher stock prices will tend to hire more, reinvest into growing the business which requires more employees. Amazon has been on a hiring tear all year, for example. Then there was also the whole CARES act this year, and the follow-up package that should be passed any day now. Which offered an unprecedented level of unemployment insurance for laid off workers and actually reduced the poverty rate in the country over this summer to lower than pre-pandemic levels.

Synaesthesia 6y ago
Stockholders did great but folks working ordinary jobs not so much. Lots of people got laid off or had to work in dire conditions. This Cares act also appropriated most of the money for corporate welfare and only a small portion for ordnirary people.
AndrewBissell 6y ago
The reason large cap stocks are going up the way they are is because their small- and medium-sized competition is being systematically suffocated by lockdowns and doesn't have the same access to publicly subsidized credit to wait out the storm. The DoorDash and Amazonification of the economy is not some organic development, it is being directly fueled by the pandemic response. The CARES Act was a joke for everyone except the large corporations to which it made $5 trillion available. A single $600 check and some meager UI for everyone else, and for small businesses, coverage for a measly 10 weeks of payroll.
dnautics 6y ago
Wealth is not zero-sum, but when you artficially create liquidity it steals value from the labour class - note how the price of the mcchicken, which at $1.00 was a staple for laborers, went to $1.37. The labor class is not generally directly seeing the fruits of this liquidity. Even when progressives channel these funds to say low income housing, it's still trickle-down, much of it winds up in the pockets of, e.g. construction firm contracted to build it, politically connected solar panel company because these projects must fulfill green bona fides, etc.
- dnautics 6y ago
  correction: McChicken is now $1.29, not $1.37
- misiti3780 6y ago
  Also, at least in the US, around 50% of the population (last time i checked) does not own stocks.
  - dnautics 6y ago
    yep. if we had a stock market crash with no bailout it might actually level the inequality.
klyrs 6y ago
Accounting for inflation, there is a wealth transfer. As the rich get richer, supply-constrained assets like housing become more expensive. Folks whose income doesn't scale similarly lose purchasing power, and their quality of life drops as a higher portion of their income goes to rents.
- almost_usual 6y ago
  More people will stop paying rent. Homeowners will not be able to evict them during / post Covid ( especially in the Bay Area ). I think we’ll see squatting in a home until it becomes yours more common as well.
- cactus2093 6y ago
  Maybe you’re right, I’m generally wondering if there is a wealth transfer, but so far it seems much more complicated than any simple analysis or example I’ve seen. The example you chose is a particularly bad one though because rents are down a lot this year in high cost of living areas. Also, just in general there’s no reason housing should be a “supply constrained resource” by definition like you seem to be taking as a basic fact. Take a look at Tokyo for example.
antisthenes 6y ago
> That just seems like the same old mistake of thinking that wealth is zero-sum. The mistake is actually thinking that wealth is never zero-sum. Although the myth is so pervasive among HN circles, it's almost like an old wive's tale and extremely hard to combat at this point. It's also just a very incorrect generalization. Anyone who's had more than a rudimentary brush with economics should have no trouble understanding why that is. To give a few reasons why that statement is usually either outright false or a gross oversimplification to the point of being useless: 1. Whether something is zero-sum or not depends on the period of time you're looking at. Always. When you say something is or isn't zero-sum, you need to specify what time period you're referring to. Good place to start is here. https://www.economicshelp.org/blog/glossary/short-run-long-run-very-long-run/ https://www.economicshelp.org/blog/glossary/short-run-long-r... In this particular case, I'd consider the COVID-19 lockdowns to still be short-run. And it isn't particularly evident if the wealth during this time has increased, is zero-sum or negative-sum 2. Many things that traditionally generate or store wealth for the people are indeed zero-sum. Desirable land within a certain zip-code, for example. Or in an area with high economic activity, e.g. downtown of a city. These things are both explicitly zero-sum (although it doesn't directly transfer 1:1 as wealth). Their valuation may grow in the long-run, which, if sold, and transferred to other economic activities by their owners, would make the wealth a net gain. 3. Market Cap/Valuation is not wealth. When sellers/buyers are large enough, the price of a stock does not directly transform into the same amount of wealth. You can't take AMZN and sell off all of its stock at its current price. 4. Pertaining to the current situation, it isn't really clear if companies that are hiring more and generating more wealth right now is compensating for the country-wide loss of jobs from the pandemic. Not even economists can predict with good accuracy whether this is going to result in a net wealth gain when all is said and done. However, this is evidence of a wealth transfer, because the surplus labor generated by extra AMZN workers goes directly to its largest shareholders, e.g. Bezos. (Note, that you can have a positive-sum wealth generation and a wealth transfer at the same time) > Then there was also the whole CARES act this year 5. Printing money does not generate wealth.
itbeho 6y ago
One COVID related transfer of wealth involves the Paycheck Protection Program. I know of several local profitable small businesses that received loans through this program. They were never in a position to layoff workers. When those loans are forgiven, as most are, or will be, where does that money go? Right in to the owner's pocket. It's interesting how many law firms qualified...

Synaesthesia 6y ago

Stockholders did great but folks working ordinary jobs not so much. Lots of people got laid off or had to work in dire conditions. This Cares act also appropriated most of the money for corporate welfare and only a small portion for ordnirary people.

AndrewBissell 6y ago

The reason large cap stocks are going up the way they are is because their small- and medium-sized competition is being systematically suffocated by lockdowns and doesn't have the same access to publicly subsidized credit to wait out the storm. The DoorDash and Amazonification of the economy is not some organic development, it is being directly fueled by the pandemic response. The CARES Act was a joke for everyone except the large corporations to which it made $5 trillion available. A single $600 check and some meager UI for everyone else, and for small businesses, coverage for a measly 10 weeks of payroll.

dnautics 6y ago

Wealth is not zero-sum, but when you artficially create liquidity it steals value from the labour class - note how the price of the mcchicken, which at $1.00 was a staple for laborers, went to $1.37. The labor class is not generally directly seeing the fruits of this liquidity. Even when progressives channel these funds to say low income housing, it's still trickle-down, much of it winds up in the pockets of, e.g. construction firm contracted to build it, politically connected solar panel company because these projects must fulfill green bona fides, etc.

dnautics 6y ago
correction: McChicken is now $1.29, not $1.37
misiti3780 6y ago
Also, at least in the US, around 50% of the population (last time i checked) does not own stocks.
- dnautics 6y ago
  yep. if we had a stock market crash with no bailout it might actually level the inequality.

klyrs 6y ago

Accounting for inflation, there is a wealth transfer. As the rich get richer, supply-constrained assets like housing become more expensive. Folks whose income doesn't scale similarly lose purchasing power, and their quality of life drops as a higher portion of their income goes to rents.

almost_usual 6y ago
More people will stop paying rent. Homeowners will not be able to evict them during / post Covid ( especially in the Bay Area ). I think we’ll see squatting in a home until it becomes yours more common as well.
cactus2093 6y ago
Maybe you’re right, I’m generally wondering if there is a wealth transfer, but so far it seems much more complicated than any simple analysis or example I’ve seen. The example you chose is a particularly bad one though because rents are down a lot this year in high cost of living areas. Also, just in general there’s no reason housing should be a “supply constrained resource” by definition like you seem to be taking as a basic fact. Take a look at Tokyo for example.

antisthenes 6y ago

> That just seems like the same old mistake of thinking that wealth is zero-sum. The mistake is actually thinking that wealth is never zero-sum. Although the myth is so pervasive among HN circles, it's almost like an old wive's tale and extremely hard to combat at this point. It's also just a very incorrect generalization. Anyone who's had more than a rudimentary brush with economics should have no trouble understanding why that is. To give a few reasons why that statement is usually either outright false or a gross oversimplification to the point of being useless: 1. Whether something is zero-sum or not depends on the period of time you're looking at. Always. When you say something is or isn't zero-sum, you need to specify what time period you're referring to. Good place to start is here. https://www.economicshelp.org/blog/glossary/short-run-long-run-very-long-run/ https://www.economicshelp.org/blog/glossary/short-run-long-r... In this particular case, I'd consider the COVID-19 lockdowns to still be short-run. And it isn't particularly evident if the wealth during this time has increased, is zero-sum or negative-sum 2. Many things that traditionally generate or store wealth for the people are indeed zero-sum. Desirable land within a certain zip-code, for example. Or in an area with high economic activity, e.g. downtown of a city. These things are both explicitly zero-sum (although it doesn't directly transfer 1:1 as wealth). Their valuation may grow in the long-run, which, if sold, and transferred to other economic activities by their owners, would make the wealth a net gain. 3. Market Cap/Valuation is not wealth. When sellers/buyers are large enough, the price of a stock does not directly transform into the same amount of wealth. You can't take AMZN and sell off all of its stock at its current price. 4. Pertaining to the current situation, it isn't really clear if companies that are hiring more and generating more wealth right now is compensating for the country-wide loss of jobs from the pandemic. Not even economists can predict with good accuracy whether this is going to result in a net wealth gain when all is said and done. However, this is evidence of a wealth transfer, because the surplus labor generated by extra AMZN workers goes directly to its largest shareholders, e.g. Bezos. (Note, that you can have a positive-sum wealth generation and a wealth transfer at the same time) > Then there was also the whole CARES act this year 5. Printing money does not generate wealth.

itbeho 6y ago

One COVID related transfer of wealth involves the Paycheck Protection Program. I know of several local profitable small businesses that received loans through this program. They were never in a position to layoff workers. When those loans are forgiven, as most are, or will be, where does that money go? Right in to the owner's pocket. It's interesting how many law firms qualified...