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> It amazes me why most people do not grasp this. I think it is lack of education. Huh? Literally everybody grasps this. This is the most widely parroted mains

> It amazes me why most people do not grasp this. I think it is lack of education. Huh? Literally everybody grasps this. This is the most widely parroted mainstream narrative about the economy right now on the internet. Hell, you can't throw a rock at the Wall Street Journal (conservative) or the New York Times (liberal) without hitting a sentence that mentions wealth inequality brought on by fed policy. For further evidence, your comment has been upvoted to the top because everybody on HN believes the same thing as you. Have you ever examined the idea that it could be you who lacks education? Have you thought about what the economy would look like right now if there had been no accommodative monetary policy from the Federal Reserve for the last 10 years? You're angry because it feels like everybody is getting rich and you aren't. What you don't understand is that bull markets are always temporary. This stuff moves in cycles. Sky high valuations on financial assets might be making rich people SEEM ridiculously rich right now, but this is not a permanent state of being. The companies and assets they own all exist in the real world and will eventually have to back up their valuations with real earnings. The minute inflation starts creeping up, the federal reserve will have to increase interest rates and cut off the money printer. In an instant, wealth inequality will start shifting the other direction, and valuations will fall.

notahacker 6y ago
This narrative also has the effect of deflecting attention from other policies which contribute towards inequality an awful lot more. It's not like the majority of recorded history on the Gold Standard was noted for the bottom 90% enjoying relatively large shares of national wealth and income security.
- jkhdigital 6y ago
  It’s not a “narrative,” it is an economic theory with substantial evidentiary support that deserves serious consideration by policy makers.
  - fuzzfactor 6y ago
    It's never been merely a theory among those it actually happened to.
- f38zf5vdt 6y ago
  Yet, paradoxically, the economic golden era of post-WW2 United States from 1946-1969 was entirely on a gold standard.
  - torwayburger 6y ago
    You denote the end of the era. I assume you understand why it ended.
  - Aerroon 6y ago
    It might be related to the gold standard, but I'd argue that WW2 was a bigger factor. The US was already the strongest economy and the competition was devastated by war. Add on to that the development of the intermodal shipping container and it was suddenly possible for the US to transport their goods cheaply. The reason this golden age ended is that other countries had finally recovered from the devastation of war.
    - georgeplusplus 6y ago
      This view totally ignores the domestic policies US took in the 60s which was bloated deficits from the new deal and Vietnam war which has been attributed to collapsing the Bretton Woods dollar system.
    - wyre 6y ago
      How do other countries devastated by war have to do with US economic equality? Shipping technology has only gotten better since than too but that just hurts mom&pops and helps online retailers.
      - Aerroon 6y ago
        >How do other countries devastated by war have to do with US economic equality? Because there was less competition on the international stage for the goods produced in the US. This meant that production companies could pay their workers more since they were earning more. Relatively low skilled labor would earn a lot more money. This lifted up the poor. Eventually those jobs started moving away from the US, because other countries could produce the same goods at lower cost since they could pay workers less. >Shipping technology has only gotten better since than too but that just hurts mom&pops and helps online retailers. None of it has been as revolutionary as the intermodal shipping container. Before that it took days and sometimes weeks to load cargo onto a ship. The main point with the shipping container is that it made international trade significantly cheaper.
cmmeur01 6y ago
So we haven't been experiencing inflation? I guess it's just me seeing all the real items in the economy skyrocket in price. But I guess when you can just readjust the definition and what's included it doesn't matter. The fed won't be able to raise interest rates without crushing the same people they were lowered to support.
- lallysingh 6y ago
  1.4%? https://www.kiplinger.com/economic-forecasts/inflation https://www.kiplinger.com/economic-forecasts/inflation
  - rbultje 6y ago
    The official inflation numbers do not appear to reflect people's significant worries that rent prices or health care cost (etc.) keep going up.
    - 23iofj 6y ago
      In particular: education, insurance, and housing really is accurately reflected in the CPI, but the true price of non-shit consumer goods are consistently under-estimated in the CPI.
      - adam_arthur 6y ago
        Housing is not included in CPI, only "rents". If home prices go up 10% this year, but interest rates drop such that the carrying cost is the same, the effect on CPI is net 0% inflation. Obviously the purchase price matters, because the higher prices are, the more money you need to even get in the door with homeownership.
        23iofj 6y ago
        > Housing is not included in CPI, only "rents". This reads like an oxymoron to anyone who's not a property owner, which is about half the country -- all of whom are in the bottom 90% referred to in the headline.
natenthe 6y ago
The article that this thread is based off of is literally the opposite take from my original post. The article claims that America's 1% is responsible for the wealth inequality. That is why I posted my comment. My opinion, and the "majority" opinion according to you, is that wealth inequality is because of Fed policies, not the 1% boogey-man. The people protesting are not protesting the Fed. No institution (i.e. media, grassroots, journalists) criticizes the Fed - it's always the 1%. But, I guess you wouldn't understand, since you make baseless assumptions about internet strangers. How would you know my net worth - do you think there aren't billionaires that share my "mainstream" opinion? Your fallacious logic and personal attacks against me do not diminish my argument. In fact, since you cannot attack the substance of my argument, you have already admitted defeat.
- toiletfuneral 6y ago
  you speak like a Ducktales villain, I'm guessing you're a libertarian
- codesnik 6y ago
  um, I wonder, who works in Fed and who writes their policies?
- pembrook 6y ago
  I have nothing against you personally. I'm just refuting your idea that Fed actions from the 2010s are responsible for wealth inequality that has been rising since the 1970s. So how do you explain everything that happened on the wealth inequality front from the 1970s up to the financial crisis of 2009? I don't agree with everything in the original article either, but many of the points it made are correct.
  - jkhdigital 6y ago
    The 2010s were especially crazy, but I’m pretty sure this criticism of Fed policy extends back to at least the 1990s.
  - f38zf5vdt 6y ago
    So this all started when the US went off the gold standard then?
asdffdsa 6y ago
Please read the article. It clearly mentions income as a reason for income inequality and not asset value inflation which is due to the fed policy.
- natenthe 6y ago
  The irony...
  - asdffdsa 6y ago
    What irony? Please enlighten me
- pembrook 6y ago
  I was replying to OP's claims that the Federal Reserve is the "evil puppet master" behind wealth inequality. This is patently false. Inequality has been expanding since the 1970s, long before the "evil bank bailouts" and accommodative monetary policy of the 2010s Federal Reserve.
  - jkhdigital 6y ago
    That’s the point. The Fed essentially gained complete control over the value of the dollar once Nixon severed it from gold in the early 70s. Easy monetary policy has been the norm since the 1990s.
    - pembrook 6y ago
      You only need to go back as far as the 2000s to see interest rates of 6+ percent. I'm not sure anyone would consider that "easy monetary policy." Also, you do know that inflation and boom-and-bust cycles still happened while we were on the gold standard right?
      - natenthe 6y ago
        Business cycles and asset inflation are different. Business cycles are natural to capital markets, asset inflation is caused by massive artificial injections of money (a la quantitative easing).
BenoitEssiambre 6y ago
Exactly. Mainstream actually educated economists are right, not people hyperventilating about money printing. On top of what you said about the effect of printing making valuations high, only temporarily and only on paper, the opposite lack of printing, is actual redistribution towards the rich in a much more real and persistent way. Insufficiently inflationary money can be used as a way for the rich to withdraw from the private economy when things are getting too turbulent and park their wealth in government paper having greater than market rates of returns (on a risk adjusted, liquidity adjusted basis). If government money didn't exist, these people would have to stay in the turbulence when the economy hits a storm. In a private economy, it's normal for returns on assets to occasionally turn negative. Wealth is sometimes difficult to keep constantly growing year after year. With low inflation, the rich can divest from private assets at the first sign of trouble, shrink or close businesses, kick employees to the curb and they get to park their wealth in government guaranteed paper. A deflationary government currency is basically a subsidy for causing unemployment and destroying careers, a subsidy that often gets indirectly paid by the poor. Money printer keep going brrr please.
- jkhdigital 6y ago
  Not sure if you intended to, but despite the hand-waviness this sounds like you’re making an argument for a return to hard currency...
  - BenoitEssiambre 6y ago
    Because I am fairly pro market but read enough mainstream economics to know that government paper retaining value more than private assets is much more of a distortion than said paper gradually losing value towards its intrinsic value of nothing. The thing is, stable money that predictably loses value is a great thing to have for the economy as it allows people to negotiate contracts and conduct business in a predictable manner. Medium of account, medium of exchange etc. Money being a store of value is an unfortunate consequence of it being a medium of exchange that often has to be mitigated. Fiat should never be widely used for saving. Money is just an IOU. When everyone's savings are IOUs, on average everybody indirectly owes everybody else their savings. Instead, savings should be tied to real stuff such as businesses, inventory, production capacity etc. not just all be pure promises. When too many people hoard pure promises and all believe that it's true wealth, bad things happens. Hard currencies while not good for conducting business since they are too unstable might be better as stores of value as they fluctuate and have negative returns when they should so tend to not crowd out other asset markets as much as government stabilized currencies do when inflation is not high enough. Just make sure the government does not try to stabilize hard currencies. That caused the great depression.
deelowe 6y ago
We're entering a potentially deflationary period. An aging demographic and technology create deflarionary pressure as people leave the workforce and technology improved efficiency. The Fed wants to create inflation. We know what's going to happen over time by observing germany and japan.
- bedhead 6y ago
  Not entering, in. Have been in one for over a decade. And it's getting worse.
  - Godel_unicode 6y ago
    What data are you basing this statement off of? The generally reported inflation figures for the US economy tell a markedly different story than you are.
- Godel_unicode 6y ago
  Germany has had negative inflation 1 year out of the last 30, and has hovered between 1 and 2 percent most years. Sounds good to me...?
  - deelowe 6y ago
    Germany is an example of where their monetary policy has allowed them to keep inflation at the rate it's at. Japan is an example of where they have failed. Both are still good examples.
- MrMan 6y ago
  We need more immigration it will have at least a temporary salutary effect on our underlying demographic issues. It’s weird to me that no arguments ever seem to reach the mainstream these days that population growth achieved by mass immigration worked for the Americas before ( and by worked I mean in a narrow economic sense it was attended by many bad problems )
adam_arthur 6y ago
Except the situation we're in is unprecedented. Never before has the government stepped in with this much force in response to an economic crisis. The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump. Should the government have done nothing? Absolutely not, but aid should have been better targeted. Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. The business cycle is no longer a cycle at all, things just go up. Was the virus a predictable event? Not at all, but pretty much every bust in the business cycle is due to a new unforeseen tail risk that materializes. That's why it's prudent not to excessively leverage yourself in the good times, because bad times will come. Certainly businesses such as restaurants, that were forced by the government to close, or travel, where it truly was an apocalyptic scenario, should have received the bulk of the aid.
- pembrook 6y ago
  > The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump. The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Just as everyone expected. Did fiscal and monetary policy help smooth things out? Sure. But again, earnings are normalizing, like we knew they would. Markets discount the entire future, not just what's going to happen next month. > Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. Most companies pre-COVID were nowhere near "excessively leveraged." I think you (as well as OP) are conflating 2009 with COVID. These are two distinctly separate things. As are monetary (The Fed) and fiscal policy (Congress). > The business cycle is no longer a cycle at all, things just go up. So you're saying "this time is different." Let's see how that plays out.
  - username90 6y ago
    > So you're saying "this time is different." Let's see how that plays out. Main difference from the past recessions is that today the main way to store money is index funds. In recessions people pump money into savings, ie into index funds, ie into the stock market making stocks value increase rather than fall. As long as people believe that index funds are a more stable currency than the dollar this will continue to be true in future recessions.
mistermann 6y ago
> Have you thought about what the economy would look like right now if there had been no accommodative monetary policy from the Federal Reserve for the last 10 years? Is this not a bit of a false dichotomy though: "accommodative monetary policy" (as it is done), or nothing? There are numerous different ways we could achieve "accommodative monetary policy", each of which would have different outcomes.
newacct583 6y ago
> You're angry because it feels like everybody is getting rich and you aren't. This is uncharitable. In fact most middle class folks who sign on to this frame are motivated by basic ideas like justice and fairness. Realistically policies designed to address wealth inequality are going to make very little difference to anyone here making a typical engineering salary. It's easy to sign on to "a rising tide lifts all boats" when you hear it the first time. But after decades of waiting, the dinghies are just plain sunk at this point as the yachts are pulling out of the harbor. It's time to try something else.
- wernercd 6y ago
  The problem is that more people are middle class+ than ever... so while you complain of "decades of waiting" the fact remains that all boats ARE rising. The only difference is that you now have a direct connection to the few that have risen faster - there have always been those people. But you now see them. They are still the 1% but they are in your face like never before. "it's time to try something else" What else is there? Socialism? Tried, failed worse. Communism? Even worse. In all systems man has created, there's inequality. "equity" (equal outcome) has been proven an unmitigated disaster time and time and time again. Capitalism is the worst system ever. Except for all the other systems which are worse.
  - arvinsim 6y ago
    IMO Capitalism is not sustainable. And if this the best system that mankind can come up with, then the future looks bleak.
    - wernercd 6y ago
      Well, honest question... what's the alternative? because all the other options have proven to be worse by magnitudes of order. Calls that it's not sustainable are like cries of impending starvation and privation... yet "famines" haven't happened because advances created by... capitalism. Better crop yields, better farm results, etc. Driven by "greedy capitalists". can we do better? Sure... fight crony capitalism? coporatism? absolutely... But end of day... the alternatives? have proven worse - unless you have proof otherwise and history isn't with you on that...
hindsightbias 6y ago
We should just reset everyones 401k to what their 2008 values would be after GM, airlines and their suppliers were sent to bankruptcy court. Smash the last unions, wipe out pension funds... quite the libertarian utopia we could all be living in today.
jazzyk 6y ago
Almost noone in my highly educated and successful social circle grasps this. We are talking MBAs and PhDs. They all think that the bailouts in 2008 and in 2020 were necessary because otherwise "the economy would collapse".
evo_9 6y ago
No, 100% for sure everyone does not know or understand this. Most of my family are clueless about this stuff; do you think Fox News - their and many peoples only news source - are sharing that bit of insight with their audience?
- jazzyk 6y ago
  Why bring politics into this? Most of my economically clueless friends are liberals who only watch CNN and read NYT. Economic Ignorance is widespread and bipartisan.
  - colecut 6y ago
    I don't see any political implication. He singled out Fox news because that is what his family watches.
    - jazzyk 6y ago
      Really? "... and many people's only news source"
- mistermann 6y ago
  I've seen clips of Tucker Carlson talking about this sort of thing before. Not saying he's a righteous source of unbiased truth, but he's better than he often gets credit for imho.
  - MrMan 6y ago
    Sounds reasonable I will check him out!
dragonwriter 6y ago
> Literally everybody grasps this. This the most widely accepted mainstream narrative about the economy right now on the internet. Heck, much of it (the parts that aren't confusing the Fed with other repairs of government) has been echoed by Fed board members and other (in the minority, at the time) government decision makers. Overreliance on the Fed and top-down monetary policy to do the economic job for which fiscal policy is better suited has been a recurring, mainstream criticism for years.
alsetmusic 6y ago
> Huh? Literally everybody grasps this. This the most widely accepted mainstream narrative about the economy right now on the internet. > Hell, you can't throw a rock at the Wall Street Journal (conservative) or the New York Times (liberal) without hitting a sentence that mentions wealth inequality brought on by fed policy. For further evidence, your comment has been upvoted to the top because everybody on HN believes the same thing as you. You just named three institutions that cater to highly educated people. I don’t think much of this is understood by a huge portion of the general population. I’m not talking down about people who didn’t get a higher education (I didn’t finish mine). I’m just pointing out that this is a pretty weak argument for “everybody”. Edit: a word, a punctuation
dnautics 6y ago
> Huh? Literally everybody grasps this. This is the most widely parroted mainstream narrative about the economy right now on the internet. That may be the case but traction on this narrative was near zero if not negative even say two months ago. "Inflation? The poor are in debt, so it's good for them right? Lel" More importantly the professional pundit class (neoliberal economists like krugman) and even the socialist-adjacent MMT theorists do NOT see things this way and push hard for policies that while well meaning will likely result in stealing even more from the working class. The media of course feeds off of this class so it may (finally) be part of the "internet discourse", it's not part of the "mainstream discourse". > In an instant, wealth inequality will start shifting the other direction, and valuations will fall No, if you understand the mechanism of how inflation steals from the labor class, you would know that "it doesn't work that way". It is not an "instant reversal" of wealth inequality, except for if the crashes brought out by the interest rate hikes are accompanied by not bailing out the wealthy, and we all know how the track record on that has been going.
rorykoehler 6y ago
Most people don't understand this. Maybe in your bubble they do but it is never laid out so black and white.
xbmcuser 6y ago
The biggest problem is the large disparity between income and capital gains tax. This has resulted in stock market appreciation growing the economy instead of a growing economy resulting in stock market appreciation.
Gustomaximus 6y ago
> you can't throw a rock at the Wall Street Journal (conservative) or the New York Times (liberal) without hitting a sentence that mentions wealth inequality brought on by fed policy. I dont feel that's a mass read category. But go to the mass right news you wont see much on inequality at all (obviously you do on the left). Right news like Fox tends to be more about taxes taking your hard work away type rhetoric. And the 'bigger pie' arguement which sounds great but lacks practical application. > The minute inflation starts creeping up, the federal reserve will have to increase interest rates and cut off the money printer. In an instant, wealth inequality will start shifting the other direction, and valuations will fall. Really? My understanding is inflation tends to bring wealth inequality on the other end. People who own assets see these protected from value erosion while wages tend to get eroded. I believe if you want to reduce wealth inequality you need many things but the core is around 1) strong progressive taxation, 2) market regulation to stop monopolistic and similar behaviour and 3) employee protection/regulation to allow workers to have some teeth in the wage negotiations.
idrios 6y ago
>Have you ever examined the idea that it could be you who lacks education? >You're angry because it feels like everybody is getting rich and you aren't. You could have made your point without these personal attacks. Also, I don't understand what the parent comment said that you think was wrong. Inflation is basically a flat percentage tax on everyone with USD (and subsidy to debtors as percentage of your debt). If the government is printing money to pay back its own debts through bonds and such, it's taking money from everyone and then giving it back to only the wealthy. You responded with, paraphrasing, "have you though about if the fed had no accommodative monetary policy?" But the parent didn't say the fed should have done nothing, (s)he said what they did do exacerbated wealth inequality. The monetary policy we got could have been one that bailed out the people whose houses were about to be foreclosed instead. Or a stimulus check to anyone who earned under a certain threshold of income. Or a more conservative approach of letting the banks fail, become liquidated, buy the bank's assets and then auction them off. There are tons of outcomes besides the false dichotomy of "no accommodative policy for the last 10 years" vs the ones we got.
- freeone3000 6y ago
  > But the parent didn't say the fed should have done nothing, (s)he said what they did do exacerbated wealth inequality. The monetary policy we got could have been one that bailed out the people whose houses were about to be foreclosed instead. Or a stimulus check to anyone who earned under a certain threshold of income. These are fiscal policies, not monetary policies. The fed cannot do these things. The fed can only buy and sell securities, including its infinite supply of Treasury bonds, and raise and lower interest rates. It lacks the capacity to actually help individuals.
  - idrios 6y ago
    Thank you for this correction. I wrote this thinking "Fed" as federal government, not federal reserve, which was not smart of me. I was mostly criticising the parent's ad hominem attacks
kortilla 6y ago
> Huh? Literally everybody grasps this. This is the most widely parroted mainstream narrative about the economy right now on the internet. I find this hard to believe. The narrative of the doves, the current administration, and most of the Democratic Party is that these bailouts are necessary. That’s the entire reason they are doing this. Your post reflects current mainstream thinking in neoliberalism. There is nothing special here and it’s just a disagreement on whether near term depression is worse than supporting the inequality.
anm89 6y ago
> You're angry because it feels like everybody is getting rich and you aren't. What you don't understand is that bull markets are always temporary. This stuff moves in cycles. I've benefited massively in financial terms during the pandemic and resulting fed action and I still think it's dangerous and misguided. You are painting with very broad, simple strokes here. Regardless of the fact that there is press coverage, the average American could not in any meaningful terms describe what the fed is or what it does, while maybe a quarter might know that it has something to do with "printing money" (obviously anecdotal). The idea that the complex consequences of fed policy are well understood by the average American is preposterous. The "experts" can't even agree on basic facts about what the consequences will be or have been. Case in point, go ask financial twitter if we should be expecting inflation or deflation and watch that aisles divide.
dang 6y ago
Personal attacks are not cool on HN. We ban accounts that post like that. Please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and don't do it again. We detached this subthread from https://news.ycombinator.com/item?id=26103730 https://news.ycombinator.com/item?id=26103730.
- pembrook 6y ago
  Duly noted, I regret bringing OPs education into question. Looks like I got emotionally swept up in fancying myself as defending the “common man.” I would remove the personally addressed portions if I could.
  - dang 6y ago
    Thanks! We all get carried away. The main thing is just to learn for the future.

notahacker 6y ago

This narrative also has the effect of deflecting attention from other policies which contribute towards inequality an awful lot more. It's not like the majority of recorded history on the Gold Standard was noted for the bottom 90% enjoying relatively large shares of national wealth and income security.

jkhdigital 6y ago
It’s not a “narrative,” it is an economic theory with substantial evidentiary support that deserves serious consideration by policy makers.
- fuzzfactor 6y ago
  It's never been merely a theory among those it actually happened to.
f38zf5vdt 6y ago
Yet, paradoxically, the economic golden era of post-WW2 United States from 1946-1969 was entirely on a gold standard.
- torwayburger 6y ago
  You denote the end of the era. I assume you understand why it ended.
- Aerroon 6y ago
  It might be related to the gold standard, but I'd argue that WW2 was a bigger factor. The US was already the strongest economy and the competition was devastated by war. Add on to that the development of the intermodal shipping container and it was suddenly possible for the US to transport their goods cheaply. The reason this golden age ended is that other countries had finally recovered from the devastation of war.
  - georgeplusplus 6y ago
    This view totally ignores the domestic policies US took in the 60s which was bloated deficits from the new deal and Vietnam war which has been attributed to collapsing the Bretton Woods dollar system.
  - wyre 6y ago
    How do other countries devastated by war have to do with US economic equality? Shipping technology has only gotten better since than too but that just hurts mom&pops and helps online retailers.
    - Aerroon 6y ago
      >How do other countries devastated by war have to do with US economic equality? Because there was less competition on the international stage for the goods produced in the US. This meant that production companies could pay their workers more since they were earning more. Relatively low skilled labor would earn a lot more money. This lifted up the poor. Eventually those jobs started moving away from the US, because other countries could produce the same goods at lower cost since they could pay workers less. >Shipping technology has only gotten better since than too but that just hurts mom&pops and helps online retailers. None of it has been as revolutionary as the intermodal shipping container. Before that it took days and sometimes weeks to load cargo onto a ship. The main point with the shipping container is that it made international trade significantly cheaper.

cmmeur01 6y ago

So we haven't been experiencing inflation? I guess it's just me seeing all the real items in the economy skyrocket in price. But I guess when you can just readjust the definition and what's included it doesn't matter. The fed won't be able to raise interest rates without crushing the same people they were lowered to support.

lallysingh 6y ago
1.4%? https://www.kiplinger.com/economic-forecasts/inflation https://www.kiplinger.com/economic-forecasts/inflation
- rbultje 6y ago
  The official inflation numbers do not appear to reflect people's significant worries that rent prices or health care cost (etc.) keep going up.
  - 23iofj 6y ago
    In particular: education, insurance, and housing really is accurately reflected in the CPI, but the true price of non-shit consumer goods are consistently under-estimated in the CPI.
    - adam_arthur 6y ago
      Housing is not included in CPI, only "rents". If home prices go up 10% this year, but interest rates drop such that the carrying cost is the same, the effect on CPI is net 0% inflation. Obviously the purchase price matters, because the higher prices are, the more money you need to even get in the door with homeownership.
      - 23iofj 6y ago
        > Housing is not included in CPI, only "rents". This reads like an oxymoron to anyone who's not a property owner, which is about half the country -- all of whom are in the bottom 90% referred to in the headline.

natenthe 6y ago

The article that this thread is based off of is literally the opposite take from my original post. The article claims that America's 1% is responsible for the wealth inequality. That is why I posted my comment. My opinion, and the "majority" opinion according to you, is that wealth inequality is because of Fed policies, not the 1% boogey-man. The people protesting are not protesting the Fed. No institution (i.e. media, grassroots, journalists) criticizes the Fed - it's always the 1%. But, I guess you wouldn't understand, since you make baseless assumptions about internet strangers. How would you know my net worth - do you think there aren't billionaires that share my "mainstream" opinion? Your fallacious logic and personal attacks against me do not diminish my argument. In fact, since you cannot attack the substance of my argument, you have already admitted defeat.

toiletfuneral 6y ago
you speak like a Ducktales villain, I'm guessing you're a libertarian
codesnik 6y ago
um, I wonder, who works in Fed and who writes their policies?
pembrook 6y ago
I have nothing against you personally. I'm just refuting your idea that Fed actions from the 2010s are responsible for wealth inequality that has been rising since the 1970s. So how do you explain everything that happened on the wealth inequality front from the 1970s up to the financial crisis of 2009? I don't agree with everything in the original article either, but many of the points it made are correct.
- jkhdigital 6y ago
  The 2010s were especially crazy, but I’m pretty sure this criticism of Fed policy extends back to at least the 1990s.
- f38zf5vdt 6y ago
  So this all started when the US went off the gold standard then?

asdffdsa 6y ago

Please read the article. It clearly mentions income as a reason for income inequality and not asset value inflation which is due to the fed policy.

natenthe 6y ago
The irony...
- asdffdsa 6y ago
  What irony? Please enlighten me
pembrook 6y ago
I was replying to OP's claims that the Federal Reserve is the "evil puppet master" behind wealth inequality. This is patently false. Inequality has been expanding since the 1970s, long before the "evil bank bailouts" and accommodative monetary policy of the 2010s Federal Reserve.
- jkhdigital 6y ago
  That’s the point. The Fed essentially gained complete control over the value of the dollar once Nixon severed it from gold in the early 70s. Easy monetary policy has been the norm since the 1990s.
  - pembrook 6y ago
    You only need to go back as far as the 2000s to see interest rates of 6+ percent. I'm not sure anyone would consider that "easy monetary policy." Also, you do know that inflation and boom-and-bust cycles still happened while we were on the gold standard right?
    - natenthe 6y ago
      Business cycles and asset inflation are different. Business cycles are natural to capital markets, asset inflation is caused by massive artificial injections of money (a la quantitative easing).

BenoitEssiambre 6y ago

Exactly. Mainstream actually educated economists are right, not people hyperventilating about money printing. On top of what you said about the effect of printing making valuations high, only temporarily and only on paper, the opposite lack of printing, is actual redistribution towards the rich in a much more real and persistent way. Insufficiently inflationary money can be used as a way for the rich to withdraw from the private economy when things are getting too turbulent and park their wealth in government paper having greater than market rates of returns (on a risk adjusted, liquidity adjusted basis). If government money didn't exist, these people would have to stay in the turbulence when the economy hits a storm. In a private economy, it's normal for returns on assets to occasionally turn negative. Wealth is sometimes difficult to keep constantly growing year after year. With low inflation, the rich can divest from private assets at the first sign of trouble, shrink or close businesses, kick employees to the curb and they get to park their wealth in government guaranteed paper. A deflationary government currency is basically a subsidy for causing unemployment and destroying careers, a subsidy that often gets indirectly paid by the poor. Money printer keep going brrr please.

jkhdigital 6y ago
Not sure if you intended to, but despite the hand-waviness this sounds like you’re making an argument for a return to hard currency...
- BenoitEssiambre 6y ago
  Because I am fairly pro market but read enough mainstream economics to know that government paper retaining value more than private assets is much more of a distortion than said paper gradually losing value towards its intrinsic value of nothing. The thing is, stable money that predictably loses value is a great thing to have for the economy as it allows people to negotiate contracts and conduct business in a predictable manner. Medium of account, medium of exchange etc. Money being a store of value is an unfortunate consequence of it being a medium of exchange that often has to be mitigated. Fiat should never be widely used for saving. Money is just an IOU. When everyone's savings are IOUs, on average everybody indirectly owes everybody else their savings. Instead, savings should be tied to real stuff such as businesses, inventory, production capacity etc. not just all be pure promises. When too many people hoard pure promises and all believe that it's true wealth, bad things happens. Hard currencies while not good for conducting business since they are too unstable might be better as stores of value as they fluctuate and have negative returns when they should so tend to not crowd out other asset markets as much as government stabilized currencies do when inflation is not high enough. Just make sure the government does not try to stabilize hard currencies. That caused the great depression.

deelowe 6y ago

We're entering a potentially deflationary period. An aging demographic and technology create deflarionary pressure as people leave the workforce and technology improved efficiency. The Fed wants to create inflation. We know what's going to happen over time by observing germany and japan.

bedhead 6y ago
Not entering, in. Have been in one for over a decade. And it's getting worse.
- Godel_unicode 6y ago
  What data are you basing this statement off of? The generally reported inflation figures for the US economy tell a markedly different story than you are.
Godel_unicode 6y ago
Germany has had negative inflation 1 year out of the last 30, and has hovered between 1 and 2 percent most years. Sounds good to me...?
- deelowe 6y ago
  Germany is an example of where their monetary policy has allowed them to keep inflation at the rate it's at. Japan is an example of where they have failed. Both are still good examples.
MrMan 6y ago
We need more immigration it will have at least a temporary salutary effect on our underlying demographic issues. It’s weird to me that no arguments ever seem to reach the mainstream these days that population growth achieved by mass immigration worked for the Americas before ( and by worked I mean in a narrow economic sense it was attended by many bad problems )

adam_arthur 6y ago

Except the situation we're in is unprecedented. Never before has the government stepped in with this much force in response to an economic crisis. The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump. Should the government have done nothing? Absolutely not, but aid should have been better targeted. Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. The business cycle is no longer a cycle at all, things just go up. Was the virus a predictable event? Not at all, but pretty much every bust in the business cycle is due to a new unforeseen tail risk that materializes. That's why it's prudent not to excessively leverage yourself in the good times, because bad times will come. Certainly businesses such as restaurants, that were forced by the government to close, or travel, where it truly was an apocalyptic scenario, should have received the bulk of the aid.

pembrook 6y ago
> The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump. The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Just as everyone expected. Did fiscal and monetary policy help smooth things out? Sure. But again, earnings are normalizing, like we knew they would. Markets discount the entire future, not just what's going to happen next month. > Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. Most companies pre-COVID were nowhere near "excessively leveraged." I think you (as well as OP) are conflating 2009 with COVID. These are two distinctly separate things. As are monetary (The Fed) and fiscal policy (Congress). > The business cycle is no longer a cycle at all, things just go up. So you're saying "this time is different." Let's see how that plays out.
- username90 6y ago
  > So you're saying "this time is different." Let's see how that plays out. Main difference from the past recessions is that today the main way to store money is index funds. In recessions people pump money into savings, ie into index funds, ie into the stock market making stocks value increase rather than fall. As long as people believe that index funds are a more stable currency than the dollar this will continue to be true in future recessions.

mistermann 6y ago

> Have you thought about what the economy would look like right now if there had been no accommodative monetary policy from the Federal Reserve for the last 10 years? Is this not a bit of a false dichotomy though: "accommodative monetary policy" (as it is done), or nothing? There are numerous different ways we could achieve "accommodative monetary policy", each of which would have different outcomes.

newacct583 6y ago

> You're angry because it feels like everybody is getting rich and you aren't. This is uncharitable. In fact most middle class folks who sign on to this frame are motivated by basic ideas like justice and fairness. Realistically policies designed to address wealth inequality are going to make very little difference to anyone here making a typical engineering salary. It's easy to sign on to "a rising tide lifts all boats" when you hear it the first time. But after decades of waiting, the dinghies are just plain sunk at this point as the yachts are pulling out of the harbor. It's time to try something else.

wernercd 6y ago
The problem is that more people are middle class+ than ever... so while you complain of "decades of waiting" the fact remains that all boats ARE rising. The only difference is that you now have a direct connection to the few that have risen faster - there have always been those people. But you now see them. They are still the 1% but they are in your face like never before. "it's time to try something else" What else is there? Socialism? Tried, failed worse. Communism? Even worse. In all systems man has created, there's inequality. "equity" (equal outcome) has been proven an unmitigated disaster time and time and time again. Capitalism is the worst system ever. Except for all the other systems which are worse.
- arvinsim 6y ago
  IMO Capitalism is not sustainable. And if this the best system that mankind can come up with, then the future looks bleak.
  - wernercd 6y ago
    Well, honest question... what's the alternative? because all the other options have proven to be worse by magnitudes of order. Calls that it's not sustainable are like cries of impending starvation and privation... yet "famines" haven't happened because advances created by... capitalism. Better crop yields, better farm results, etc. Driven by "greedy capitalists". can we do better? Sure... fight crony capitalism? coporatism? absolutely... But end of day... the alternatives? have proven worse - unless you have proof otherwise and history isn't with you on that...

hindsightbias 6y ago

We should just reset everyones 401k to what their 2008 values would be after GM, airlines and their suppliers were sent to bankruptcy court. Smash the last unions, wipe out pension funds... quite the libertarian utopia we could all be living in today.

jazzyk 6y ago

Almost noone in my highly educated and successful social circle grasps this. We are talking MBAs and PhDs. They all think that the bailouts in 2008 and in 2020 were necessary because otherwise "the economy would collapse".

evo_9 6y ago

No, 100% for sure everyone does not know or understand this. Most of my family are clueless about this stuff; do you think Fox News - their and many peoples only news source - are sharing that bit of insight with their audience?

jazzyk 6y ago
Why bring politics into this? Most of my economically clueless friends are liberals who only watch CNN and read NYT. Economic Ignorance is widespread and bipartisan.
- colecut 6y ago
  I don't see any political implication. He singled out Fox news because that is what his family watches.
  - jazzyk 6y ago
    Really? "... and many people's only news source"
mistermann 6y ago
I've seen clips of Tucker Carlson talking about this sort of thing before. Not saying he's a righteous source of unbiased truth, but he's better than he often gets credit for imho.
- MrMan 6y ago
  Sounds reasonable I will check him out!

dragonwriter 6y ago

> Literally everybody grasps this. This the most widely accepted mainstream narrative about the economy right now on the internet. Heck, much of it (the parts that aren't confusing the Fed with other repairs of government) has been echoed by Fed board members and other (in the minority, at the time) government decision makers. Overreliance on the Fed and top-down monetary policy to do the economic job for which fiscal policy is better suited has been a recurring, mainstream criticism for years.

alsetmusic 6y ago

> Huh? Literally everybody grasps this. This the most widely accepted mainstream narrative about the economy right now on the internet. > Hell, you can't throw a rock at the Wall Street Journal (conservative) or the New York Times (liberal) without hitting a sentence that mentions wealth inequality brought on by fed policy. For further evidence, your comment has been upvoted to the top because everybody on HN believes the same thing as you. You just named three institutions that cater to highly educated people. I don’t think much of this is understood by a huge portion of the general population. I’m not talking down about people who didn’t get a higher education (I didn’t finish mine). I’m just pointing out that this is a pretty weak argument for “everybody”. Edit: a word, a punctuation

dnautics 6y ago

> Huh? Literally everybody grasps this. This is the most widely parroted mainstream narrative about the economy right now on the internet. That may be the case but traction on this narrative was near zero if not negative even say two months ago. "Inflation? The poor are in debt, so it's good for them right? Lel" More importantly the professional pundit class (neoliberal economists like krugman) and even the socialist-adjacent MMT theorists do NOT see things this way and push hard for policies that while well meaning will likely result in stealing even more from the working class. The media of course feeds off of this class so it may (finally) be part of the "internet discourse", it's not part of the "mainstream discourse". > In an instant, wealth inequality will start shifting the other direction, and valuations will fall No, if you understand the mechanism of how inflation steals from the labor class, you would know that "it doesn't work that way". It is not an "instant reversal" of wealth inequality, except for if the crashes brought out by the interest rate hikes are accompanied by not bailing out the wealthy, and we all know how the track record on that has been going.

rorykoehler 6y ago

Most people don't understand this. Maybe in your bubble they do but it is never laid out so black and white.

xbmcuser 6y ago

The biggest problem is the large disparity between income and capital gains tax. This has resulted in stock market appreciation growing the economy instead of a growing economy resulting in stock market appreciation.

Gustomaximus 6y ago

> you can't throw a rock at the Wall Street Journal (conservative) or the New York Times (liberal) without hitting a sentence that mentions wealth inequality brought on by fed policy. I dont feel that's a mass read category. But go to the mass right news you wont see much on inequality at all (obviously you do on the left). Right news like Fox tends to be more about taxes taking your hard work away type rhetoric. And the 'bigger pie' arguement which sounds great but lacks practical application. > The minute inflation starts creeping up, the federal reserve will have to increase interest rates and cut off the money printer. In an instant, wealth inequality will start shifting the other direction, and valuations will fall. Really? My understanding is inflation tends to bring wealth inequality on the other end. People who own assets see these protected from value erosion while wages tend to get eroded. I believe if you want to reduce wealth inequality you need many things but the core is around 1) strong progressive taxation, 2) market regulation to stop monopolistic and similar behaviour and 3) employee protection/regulation to allow workers to have some teeth in the wage negotiations.

idrios 6y ago

>Have you ever examined the idea that it could be you who lacks education? >You're angry because it feels like everybody is getting rich and you aren't. You could have made your point without these personal attacks. Also, I don't understand what the parent comment said that you think was wrong. Inflation is basically a flat percentage tax on everyone with USD (and subsidy to debtors as percentage of your debt). If the government is printing money to pay back its own debts through bonds and such, it's taking money from everyone and then giving it back to only the wealthy. You responded with, paraphrasing, "have you though about if the fed had no accommodative monetary policy?" But the parent didn't say the fed should have done nothing, (s)he said what they did do exacerbated wealth inequality. The monetary policy we got could have been one that bailed out the people whose houses were about to be foreclosed instead. Or a stimulus check to anyone who earned under a certain threshold of income. Or a more conservative approach of letting the banks fail, become liquidated, buy the bank's assets and then auction them off. There are tons of outcomes besides the false dichotomy of "no accommodative policy for the last 10 years" vs the ones we got.

freeone3000 6y ago
> But the parent didn't say the fed should have done nothing, (s)he said what they did do exacerbated wealth inequality. The monetary policy we got could have been one that bailed out the people whose houses were about to be foreclosed instead. Or a stimulus check to anyone who earned under a certain threshold of income. These are fiscal policies, not monetary policies. The fed cannot do these things. The fed can only buy and sell securities, including its infinite supply of Treasury bonds, and raise and lower interest rates. It lacks the capacity to actually help individuals.
- idrios 6y ago
  Thank you for this correction. I wrote this thinking "Fed" as federal government, not federal reserve, which was not smart of me. I was mostly criticising the parent's ad hominem attacks

kortilla 6y ago

> Huh? Literally everybody grasps this. This is the most widely parroted mainstream narrative about the economy right now on the internet. I find this hard to believe. The narrative of the doves, the current administration, and most of the Democratic Party is that these bailouts are necessary. That’s the entire reason they are doing this. Your post reflects current mainstream thinking in neoliberalism. There is nothing special here and it’s just a disagreement on whether near term depression is worse than supporting the inequality.

anm89 6y ago

> You're angry because it feels like everybody is getting rich and you aren't. What you don't understand is that bull markets are always temporary. This stuff moves in cycles. I've benefited massively in financial terms during the pandemic and resulting fed action and I still think it's dangerous and misguided. You are painting with very broad, simple strokes here. Regardless of the fact that there is press coverage, the average American could not in any meaningful terms describe what the fed is or what it does, while maybe a quarter might know that it has something to do with "printing money" (obviously anecdotal). The idea that the complex consequences of fed policy are well understood by the average American is preposterous. The "experts" can't even agree on basic facts about what the consequences will be or have been. Case in point, go ask financial twitter if we should be expecting inflation or deflation and watch that aisles divide.

dang 6y ago

Personal attacks are not cool on HN. We ban accounts that post like that. Please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and don't do it again. We detached this subthread from https://news.ycombinator.com/item?id=26103730 https://news.ycombinator.com/item?id=26103730.

pembrook 6y ago
Duly noted, I regret bringing OPs education into question. Looks like I got emotionally swept up in fancying myself as defending the “common man.” I would remove the personally addressed portions if I could.
- dang 6y ago
  Thanks! We all get carried away. The main thing is just to learn for the future.