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I'm not sure I agree with this. "Interest rates" in terms of savings rates are typically below inflation. The wealthy guy and the middle class guy are not goi

I'm not sure I agree with this. "Interest rates" in terms of savings rates are typically below inflation. The wealthy guy and the middle class guy are not going to do well keeping their money in a savings account. Both have to find better ways to allocate their money and take on a little risk. Whether that is investing in a business, stocks, real estate, whatever is a better option at that time. Low interest rates actually give middle class guy more opportunity because it becomes cheaper to borrow. You can use leverage to increase your position. The most common form of this is a mortgage, but there are many other ways to utilize debt properly as well. I'm far from an economics expert, pretty novice actually. So I am probably wrong. But as a guy who came from a lower middle class household and has utilized debt & investments to change that significantly I feel like low interest rates have been a huge part of that.

whimsicalism 5y ago
It really is hard to say whether it is better or worse for the "middle class guy." Sure, it makes debt more accessible and also makes debt faster to wipe out due to inflation, but low interest rates typically increase asset prices (everything else being equal, which it usually isn't) and assets are primarily owned by the wealthy.
lotsofpulp 5y ago
> Low interest rates actually give middle class guy more opportunity because it becomes cheaper to borrow. You can use leverage to increase your position. The most common form of this is a mortgage, but there are many other ways to utilize debt properly as well. It is the same for everyone else, hence assets get more expensive. It washes out, unless you make riskier and riskier bets to stay ahead of the curve. Some will win, but most will lose.
- nipponese 5y ago
  But for the poor, a 2x in cost of milk isn’t as burdensome when there’s a 1.2x in hourly wage. Plus, the cost of borrowing to buy that new car went down. Even though I hate this current inflation in ALL non-cash assets, it’s been generally positive for the poor, in the short-term, anyway.
  - lumost 5y ago
    Is it really though? As relative demand for consumption falls there is less demand for labor. Wages stagnate and fall while income concentrates further. Most poor people wish most for a path out of poverty, but what we've seen is that the paths out have become less successful and more expensive e.g. College.
    - nipponese 5y ago
      I said short-term. Which is all voters care about.
  - merpnderp 5y ago
    How is a doubling in prices offset by a 20% increase in wages? And has there every been a time when high inflation was offset by and even higher increase in wages? Wages never keep up and inflation always hurts the poor. A rich person couldn't care less if milk's price doubles. They'll drink just as much milk. A poor person who's banking on that yearly bonus/bump in pay to pay for all the next year's inflating milk, is going to have to do without some milk.
  - gshubert17 5y ago
    If it's only the cost of milk that has doubled, I agree that a 20% hourly wage increase will cover it. It's a different story if the overall cost-of-living outpaces wages.
TuringNYC 5y ago
The wealthy may not keep their money in savings accounts (they dont) but I think the GP's argument still stands -- because most other products pay a spread above the base rate. If savings rates are low, so are all riskier rates above. As an example, Triple A corporates generally pay a mostly-consistent spread above the risk free rate. Triple B pay a mostly-consistent spread above that. And so on.
- deleted 5y ago
  [deleted]
paulpauper 5y ago
I'm far from an economics expert, pretty novice actually. So I am probably wrong. But as a guy who came from a lower middle class household and has utilized debt & investments to change that significantly I feel like low interest rates have been a huge part of that. a combination of cheap mortgages, surging home price, surging stock prices, and high-paying professional jobs. You see this all over Reddit on popular Fire subs of ppl in their 20s and 30s with substantial wealth thanks to those four factors. For people with good incomes and and hence an opportunity to borrow and invest, the past decade has been amazing.

whimsicalism 5y ago

It really is hard to say whether it is better or worse for the "middle class guy." Sure, it makes debt more accessible and also makes debt faster to wipe out due to inflation, but low interest rates typically increase asset prices (everything else being equal, which it usually isn't) and assets are primarily owned by the wealthy.

lotsofpulp 5y ago

> Low interest rates actually give middle class guy more opportunity because it becomes cheaper to borrow. You can use leverage to increase your position. The most common form of this is a mortgage, but there are many other ways to utilize debt properly as well. It is the same for everyone else, hence assets get more expensive. It washes out, unless you make riskier and riskier bets to stay ahead of the curve. Some will win, but most will lose.

nipponese 5y ago
But for the poor, a 2x in cost of milk isn’t as burdensome when there’s a 1.2x in hourly wage. Plus, the cost of borrowing to buy that new car went down. Even though I hate this current inflation in ALL non-cash assets, it’s been generally positive for the poor, in the short-term, anyway.
- lumost 5y ago
  Is it really though? As relative demand for consumption falls there is less demand for labor. Wages stagnate and fall while income concentrates further. Most poor people wish most for a path out of poverty, but what we've seen is that the paths out have become less successful and more expensive e.g. College.
  - nipponese 5y ago
    I said short-term. Which is all voters care about.
- merpnderp 5y ago
  How is a doubling in prices offset by a 20% increase in wages? And has there every been a time when high inflation was offset by and even higher increase in wages? Wages never keep up and inflation always hurts the poor. A rich person couldn't care less if milk's price doubles. They'll drink just as much milk. A poor person who's banking on that yearly bonus/bump in pay to pay for all the next year's inflating milk, is going to have to do without some milk.
- gshubert17 5y ago
  If it's only the cost of milk that has doubled, I agree that a 20% hourly wage increase will cover it. It's a different story if the overall cost-of-living outpaces wages.

TuringNYC 5y ago

The wealthy may not keep their money in savings accounts (they dont) but I think the GP's argument still stands -- because most other products pay a spread above the base rate. If savings rates are low, so are all riskier rates above. As an example, Triple A corporates generally pay a mostly-consistent spread above the risk free rate. Triple B pay a mostly-consistent spread above that. And so on.

deleted 5y ago
[deleted]

paulpauper 5y ago

I'm far from an economics expert, pretty novice actually. So I am probably wrong. But as a guy who came from a lower middle class household and has utilized debt & investments to change that significantly I feel like low interest rates have been a huge part of that. a combination of cheap mortgages, surging home price, surging stock prices, and high-paying professional jobs. You see this all over Reddit on popular Fire subs of ppl in their 20s and 30s with substantial wealth thanks to those four factors. For people with good incomes and and hence an opportunity to borrow and invest, the past decade has been amazing.