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On the flip side of income, I think the inflation indicators have also diverged to the point where the mean is no longer telling the whole story.
by zyang 6y ago
On the flip side of income, I think the inflation indicators have also diverged to the point where the mean is no longer telling the whole story.
- mmazing 6y agoCan you expand on that some more? Thanks
- ItsMonkk 6y agoIf you have a constantly increasing money supply, everyone's goal is to spend as little as possible on their day to day costs(which is what the CPI tracks), and squirrel away as much as possible in assets. The net effect this has had over time is those who are really good at using leverage in a decreasing interest rate environment end up with exponential growth, and use that to buy more assets, which allows them to lever more... This leads to a bifurcation between the people who make money through labor and those who make money through ownership of assets. The greater the wealth inequality in a population, the bigger a percentage of this new money goes to an increase of assets as opposed to day-to-day expenses. This shrinks CPI inflation for an equal amount of money supply expansion, which in turn allows the money supply to expand ever faster and inequality to grow further.