19 ms·

Does QE Cause Wealth Inequality?

212 points by paulsb 5y ago

worik 5y ago
Well duh! Print lots of money Give it to people who have lots of money (banks) The rich get richer. What is so hard to understand about that? The powers that be decided that an increase in wealth disparity was a price worth paying to keep economic activity happening (that and inflation, interest rates could well balloon over the next decade). An alternative was to print lots of money and give it to poor people. That would still have cause inflation, but improved wealth disparities. But the powers that be do not have that sort of power.
- dehrmann 5y ago
  > The rich get richer. It depends on if assets appreciate disproportionally more than wages. Remember that poor people have few assets, so they're not getting left behind any more than if there weren't QE. Also remember that the benchmark is actually if there weren't QE. Suppose covid caused a depression because of a lack of Fed intervention. How would people have fared, then? I have opinion on this either way. My point is that it's complicated and hard to say.
  - worik 5y ago
    Really? Wages are spent so to not depreciate. Those that use debt to buy assets, hence face interest costs, could suffer terribly if interest rates outpace the value of their assets. An asset price crash would burn then badly (as happened in London property market, if memory serves, in the 1990s)
    - iso1631 5y ago
      Mortgages in the UK aren't like in the US, even now it's rare to have more than a 5 year fix, meaning you buy a property and, if interest rates go up, and prices crash, you're left on the "standard variable rate" 5 years later, paying 10-15%, leading to repossessions (especially if it happens now after 13 years of 2% mortgages), further dropping prices. You can't even remortgage onto a new fix if you're unlucky because the crash wipes out your equity, and you owe more than the property is worth, and in the UK you can't even simply hand the keys back. London average prices went from £80k for an average house price in Jan 1990 and did drop, to £65k by 1992, down 18%. It had recovered to £80k by 1996, and reached £128k by December 1999. Prices continued to increase until 2008 when they reached a high of £298k in October 2007, before dropping back to £245k, another 18% drop. Prices had recovered to their 2007 peak 5 years later, by April 2012, then continued to inflate up £487k in August 2017, where they've been relatively flat, only increasing 8% in the last 4 years. Over that 27 year period house prices increased an average 6.5% per year, with most of that 'value' going to those who leveraged their equity and bought properties to rent out in the late 90s and early 00s. That house price inflation wasn't driven from QE though, but from increased ability for people to pay (partly lower interest rates, but mainly because of increased amount of household budget being available to pay rent as more and more families have two full time working professionals, and younger people live in more and more crowded house shares)
      - worik 5y ago
        I was ten years out by memory! Thanks for that
      - worik 5y ago
        It is reasonable to assert that current asset inflation is due to concentration of wealth generally and COVID stimulation specifically. Generally as the rich get richer they run out of consumption opportunities and must put money somewhere. They buy assets and drive up the prices. Here (Aotearoa) COVID stimulation was not given to banks, but consumption opportunities for anybody with money have decreased, hence asset inflation. We can expect a "correction" if history is anything to go by. It could be a crash (like 1929 or 2008) more likely stagnation in prices and inflation in other sectors (as in the 1970s and 1990s here) Prediction is hard. Especially of the future
steve76 5y ago
[dead]
WalterBright 5y ago
This reminds me of when after WW2 ended in Germany, the old German Mark was repudiated and became worthless. It was replaced with the new Mark, and every German was given the same number of new Marks to jump start the economy. Within a week, the people who had money before the repudiation had money again, and the people who didn't didn't.
- hammock 5y ago
  Anywhere to read more about this?
  - WalterBright 5y ago
    I heard it from people who lived through it. They're all dead now. Wish I had a better reference.
- raxxorrax 5y ago
  That happened but didn't take assets into account. People that still had them profited very well. There was also a "Lastenausgleich", the English article is quite bad though: https://en.wikipedia.org/wiki/Lastenausgleich https://en.wikipedia.org/wiki/Lastenausgleich Especially the quote about it being the source of the rapid growth period is a bit ridiculous in my opinion.
azth 5y ago
Is this a surprise to anyone? It's simple logic/cause-and-effect. The sooner we move away from fiat money and interest based finance, the better.
dantheman 5y ago
YES
endymi0n 5y ago
TIL that „The Federal Reserve […] is an institution that is mostly privately owned by banks“ Maybe my view is too European on that, but are Americans aware their federal money supervision system is run by banks and how can they possibly be okay with that?
- drewvolpe 5y ago
  It's owned by banks but run by government appointees. Most Americans who watch the news and follow finance understand it's a public-private hybrid structure. As Lyn notes, this isn't unusual. Many national banks are not owned by the government, including Swiss National Bank.
- Ancapistani 5y ago
  > Maybe my view is too European on that, but are Americans aware their federal money supervision system is run by banks [...] Honestly, most Americans aren't even aware that monetary policy is a "thing". > and how can they possibly be okay with that? I'd argue that we aren't. The US Constitution explicitly gives Congress the power to "coin Money". The current reading of that phrase is that it only applies to metallic coins, not paper money. Congress then set up the legal structure around the Federal Reserve Bank system - and it's more complicated than "privately owned banks" in practice, due to the blurring of the lines between "public" and "private", and the prescribed structure of the Fed that is at least partially under direct Congressional oversight. I'll also point out that the US has had multiple monetary systems since its inception, and the Federal Reserve System has only existed for about a century.
  - nverno 5y ago
    > I'd argue that we aren't It's been a hot-button issue since it was created. If it's characterized as a system run by a bunch of bankers with greedy fingers on the tap, it sounds terrible- if it's a system to stabilize the economy, or any number of its other arguably beneficial purposes, it mightn't sound so bad. All of this things can be true, but without deep knowledge of the system (does anyone really understand all of the interactions?), it's hard to weigh the tradeoffs and so easy to jump to conclusions. I appreciate the desire for the relative simplicity of things like the gold standard. Just reading this article has made me reconsider my opinions on the matter (I was pretty certain QE was a primary mover driver of wealth centralization going in). My intuition tells me there is a lot of misleading correlation here, given how interlinked all these systems are.
gremlinsinc 5y ago
> The Fed’s role has expanded over the years, and its decisions often seem opaque and arbitrary. A small number of unelected people in a room dictate the price of money for a country of 330 million people, and can create new reserves out of thin air, or destroy reserves from the system. I'd much rather there be a liquid democracy voting system where maybe every person w/ a degree in economics gets 1 vote, I'd trust 10k economics majors over 10 rich/wealthy bank owners led by the Rothschilds.
mk81 5y ago
Yes. Anymore questions?
waynecochran 5y ago
I hate acronyms that are not spelled out right at the beginning. Just sayin'
- Mikeb85 5y ago
  QE has been a topic of mainstream news for a good decade now. Just sayin'.
  - waynecochran 5y ago
    TMBT but FWIT TLA's WHW and EHW but JK.
- deleted 5y ago
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trutannus 5y ago
The author took way too long to introduce what the abbreviation QE in this context means. It's only in the 5th paragraph. It's generally not a great idea to use an unclear acronym in the title. If you really must, at least do the reader the curtesy of defining it up front, rather than making them dig for it. To someone who's non-American and likely does not keep an eye on the FED, QE isn't likely going to be they way they've seen the idea expressed. You can know what Quantitative Easing is without immediately recognizing QE out of context in a title.
- vishnugupta 5y ago
  Those who typically visit Lyn Alden’s blog and follow her news letter (as well as her target audience) already know what QE stands for. Besides, now a days with fed so much in the news I suspect it’s becoming widely known which is a good thing.
  - trutannus 5y ago
    Yes, that makes sense for those in the US, but the FED does not really factor into the thinking of, for instance, a German. The argument of "if you read the blog you know what it means" somewhat falls flat when the link is posted on HN for people who don't already read the blog to see. Quantitative Easing isn't just an American thing, and plenty of Germans might know it as Quantitative Easing, but have never seen it called QE for various reasons (it's QL in German for sake of example).
    - deleted 5y ago
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    - jasode 5y ago
      >The argument of "if you read the blog you know what it means" somewhat falls flat when the link is posted on HN for people who don't already read the blog to see. I don't understand your complaint here. The author (Lyn Alden) is not the person who posted it here on HN. In any case, she's an American writing about USA policy where her audience already knows what "QE" is. Seems unreasonable that she should predict that a German on HN would be irritated by it.
hammock 5y ago
Lyn Alden always has great analysis.
- lancemurdock 5y ago
  She is the best. Her premium membership is worth it.
justinzollars 5y ago
It really feels like we are at the end of the road and the Fed is damned if they end QE (deflation and market crash) and dammed if they don't (very high inflation). Ray Dalio does a great job describing the end of the the "long-term debt cycle" and differentiates it from a typical "business cycle" that we are all familiar with [1]. The scary thing he describes is the end of a fiat money system, which will resemble a bank run, but for goods and services rather than for dollars. [1] https://www.linkedin.com/pulse/money-credit-debt-ray-dalio https://www.linkedin.com/pulse/money-credit-debt-ray-dalio
- anarticle 5y ago
  A run on goods is demand gone wild, aka hyperinflation.
- realce 5y ago
  Pair this with the reduction of ownership of ANY real assets/goods in the general population. I can't trade my Netflix account for food. I cannot lease my Spotify account to someone for income. I rent my house. I think when you get down to the nitty-gritty, most people actually "own" some furniture, some clothes, and a car. If a crisis actually struck, what goods or services could you actually leverage to survive off of?
Ericson2314 5y ago
The thing is we want less stupid speculation and asset bubbles and yet the economy is running far below potential, with the "tight labor markets" right now just a glimpse of how it was before (and probably a fleeting one if the inflation class warriers have their way like in the 1970s). To fix both problems --- because we need to stop just making ourselves poorer and less coordinated with prudish neoliberalism --- we should probably try to get experimental with monetary policy. Having the Fed tweak a UBI instead might help. Remember, the way that capitalism is supposed to work is that demand validates investment. Easy credit from banks to big institutions with poor consumers is stupid because too many investments still look bad! Hand out cash, and then businesses can chase the people's demand, rather than trying to create the demand all weird post-modernly. No more throwing easy money at startups waiting for them to finally be profittable 10 years later. Yes more making the poorest better off and letting the resulting supply-chain bottlenecks show where investment is actually needed. If there's no current bottleneck, you aren't trying hard enough!
- dageshi 5y ago
  I'm still yet to understand how a lot of relatively poorly paid work that probably still needs to be done, gets done under UBI. UBI leads to people not doing particular jobs because sitting at home on UBI with less but enough money is preferable. Which means those jobs have to pay more, which leads to inflation which leads to UBI raising to keep up with inflation... repeat?
  - WalterSear 5y ago
    UBI isn't unemployment. Less desirable jobs won't need to pay more: income will be in addition to UBI. The only jobs that will need to raise their wages are those that were exploitative to begin with: the ones that rely on people not even having the resources to seek better work.
  - deleted 5y ago
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  - kelseyfrog 5y ago
    > Which means those jobs have to pay more The assumption being made here is "all other things being equal". All other things are never equal.
photochemsyn 5y ago
It doesn't necessarily, but there are some issues to think about: 1) Interest rates that are low mean that middle-class savings accounts don't grown in size. QE requires low interest rates as I understand it. 2) MMT is linked to QE but guess what, an oligarchic system isn't going to distribute QE capital to middle class and poor people, it's going to go into the pockets of the ruling class. In any case, you really can't trust the corporate economists, and their performance before the 2008-2009 economic crash is proof of that. It's as bad as if the entire climate science community had predicted global cooling and we got global warming instead - clearly, the scientific community would conclude that their models are fundamentally flawed. This of course is why economics professors are safely enclosed in university business departments, so they don't have to face constant ridicule from real scientists.
- dragonwriter 5y ago
  > MMT is linked to QE No, its not. MMT rejects the fiscal/monetary dichotomy as fiction, and tends to prefer more targeted (traditionally “fiscal”) stimulus, without typical fiscal constraints, because it views the only real constraints on “fiscal” actions as monetary effects; QE is blunt stimulus that respects the classic monetary/fiscal divide that MMT argues against.
- bradleyjg 5y ago
  > QE requires low interest rates as I understand it. It’s the other way around. QE lowers interest rates; that’s the main purpose. The idea is that low interest rates force investment in risky ventures (since safe ones are offering low yields) and those risky investments on net will generate excess economic growth.
  - nybble41 5y ago
    The problem being, of course, that those risky investments were considered "risky" for a reason. A fair assessment, in the absence of forced incentives, would say they're more of a net liability than a net asset. Better than having your funds confiscated, perhaps, but otherwise not worth considering. When they fail (as many of them inevitably will) those failed investments result in waste and economic decline, not growth. And as usual the less-sophisticated investors will bear the lion's share of the losses.
fdgsdfogijq 5y ago
How have people not caught onto this yet? When the Fed prints money, its a guaranteed bet that assets go up. The rich use their wealth and huge amounts of leverage via financial instruments to generate massive returns. This has been going on for a long time. Literally all you need to do is throw your whole bank account into call options. Working a 200k-300k a year job is almost a waste of time with how much money they are printing. This is how the wealthy see it, your small paycheck (yes 300k a year is small) is a joke within the context of financial leverage. Just to reiterate, you are better off risking everything in financial markets and sitting at home watching those assets very closely than you are working.
- jliptzin 5y ago
  Throwing your whole bank account into call options would be an extremely risky thing to do. But that doesn’t invalidate your point that capital accumulation of wealthy people generally far outweighs any amount of money they would make from their labor. It doesn’t have to be call options though, with enough wealth even interest from T-bills would dwarf a $300k salary.
  - fdgsdfogijq 5y ago
    You are still missing the point. With QE, the call options are far less risky than they look. It has been this way for over a decade. People somehow cant get it into their heads, when the fed prints money, assets go up. Capitalists are having an all you can eat buffet while everyone else thinks the only thing they can do is put 3k into the SPY every month. Its a joke
    - whimsicalism 5y ago
      Yes, in "normal times" of the past decade, when you invest in call options, you are basically being compensated for discounting the risk of a crash at any particular moment. But there's no free lunch - the risk you are taking is being priced in, but sometimes the actually risky thing does happen. This line you keep repeating about "only the lower classes" xyz while the "true rich" have some deep wisdom is belied by the fact that rich people become not-so-rich trading options every day. It's straight out of the "this one trick they don't want you to know about" advertising playbook.
acd 5y ago
Qe causes all asset prices to rize in value. That include home loans which also expand. Most people loan to these home. Stock assets rize in price. Yet again higher proportion of these assets tends to be owned by richer classes.
ralusek 5y ago
If you increase the amount of USD, the USD cost of anything that isn't USD goes up. So, a lot of the market gains, housing gains, crypto gains, etc, are at least in some part to do with all of these countries increasing their money supplies. So anybody that has wealth kept in anything other than the inflating currencies is going to win, and anybody who either has savings only in fiat or is paid primarily in fiat is going to lose out. So, yes, of course it causes wealth inequality. The rich can afford to bail on a currency while it balloons.
- theonlybutlet 5y ago
  This is the interesting thing, and the whole premise of MMT (Modern Monetary Theory), the currency being the reserve currency is not prone to devaluation relative to other currencies which allows them to keep printing USD and in effect exporting their inflation, all until someday something replaces the currency as a reserve. The inequality comes from this excess cash in the market with nowhere productive to be spent on, people merely invest it in the assets they were already going to invest in, driving up asset prices (creating asset bubbles).
havkd 5y ago
Wow, how unbelievably antisemitic.
- deleted 5y ago
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88913527 5y ago
When many people have few assets, and few people have many, and you cause the value of assets to go up, the nominal gap between two is larger, but the relative amounts are the same. This is basic math. Suppose we have two individuals who experience 25% growth due to QE: Person A: $1,000 * 25% growth = $1,250 Person B: $1,000,000 * 25% growth = $1,250,000 Originally, the wealth gap between A and B was 1000:1. It remains 1000:1 after the asset appreciation. However, because wage income has long been stagnant, it becomes increasingly difficult for the poorer person to play catch up, because labor income can't scale in the way capital can. Both the proportional change and real change are worth considering when it comes to setting public policy.
- kranke155 5y ago
  Thomas Picketty - didn’t he show returns on assets far outgain salary growth ?
  - bhupy 5y ago
    That was his thesis, but it's since been questioned/refuted: https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf > Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g. https://www.economist.com/briefing/2019/11/28/economists-are-rethinking-the-numbers-on-inequality https://www.economist.com/briefing/2019/11/28/economists-are... http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequality.pdf http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequali... > Top income share estimates based only on individual tax returns, such as Piketty and Saez (2003), are biased by tax-base changes, major social changes, and missing income sources. Addressing these issues requires numerous assumptions, especially for broadening income beyond that reported on tax returns. This paper shows the effects of adjusting for technical tax issues and the sensitivity to alternative assumptions for distributing missing income sources. Our results suggest that top income shares are lower than other tax-based estimates, and since the early 1960s, increasing government transfers and tax progressivity resulted in little change in after-tax top income shares.
lend000 5y ago
An important takeaway from the wealth inequality chart: every time that wealth inequality has substantially decreased in recent history was during a recession. Staving off recessions at all costs for political reasons is a horrible policy. Market cycles are natural; we don't live in a perfect world. Market forces clearing out the inefficiencies/rebalancing power in the economy is better for long term capital allocation in society than socializing losses or printing money to rescue stock indices.
- whimsicalism 5y ago
  Is inequality the base thing we care about? Or is it only an instrumental way of accessing overall welfare, which is the thing we actually care about? If the latter is true, it seems like causing recessions in order to reduce inequality is at least somewhat akin to to cutting off the nose to spite the face.
- TAForObvReasons 5y ago
  It's analogous to the forest fires. Recessions, like smaller forest fires, help clear out the dead weight. New entities are able to grow in the wake. By aggressively staving off recessions, the smaller fires are suppressed but it leaves an ever-increasing mass of dead weight ("zombie companies"), eventually leading to an uncontrollable fire
- creato 5y ago
  I agree that maybe allowing market downturns to occur is probably a good thing. That said, an equally reasonable interpretation of your observation is that maybe inequality is not itself a problem. More inequality doesn't necessarily mean that the poor are worse off than they would be with less inequality. I wonder if we are collectively making a mistake to treat stock ownership as wealth. Stock prices going down reduces wealth inequality, but does that actually help anyone?
  - whimsicalism 5y ago
    Regardless of what you treat it is, inequality of ownership of the major enterprises in the US is worth addressing. I do think the US needs substantial reform of how ownership and corporate governance currently works in our system.
deleted 5y ago
[deleted]
indodima 5y ago
All in all, this is mostly a question of policy (not in terms of typical market regulation through interest rates, money supply etc.) and not only market mechanisms. Individuals with a high "wealth concentration" have a lot more power to pursue their goals ("gain [more] wealth [concentration], forgetting all but self"). Not only economic power, but -most importantly- power to enforce their interests politically. Most western country (especially the US) policies of the last decades pretend to do something for citizens with a low "wealth concentration", but in the end just favor the rich. Analyzing this trend only in economic terms and closing ones eyes (ears and mouth) regarding systematic political manipulation is hypocritical.
- hammock 5y ago
  Did you read the article? The entire thesis is that monetary policy (what you call "market regulation through interest rates, money supply etc") is not the primary driver of inequality, but rather it's fiscal policy (what you call political interests).
anm89 5y ago
For anyone who is a fan of Lyn, I highly recommend you follow her friend Luke Gromen. He's been doing some excellent analysis over the last few months and is one of the few people producing this kind of content who can match Lyn's depth and breadth. One podcast I liked: https://m.youtube.com/watch?v=csf4fdV-EOQ https://m.youtube.com/watch?v=csf4fdV-EOQ
coolspot 5y ago
It is well known that in the future, it won’t matter how many factories (or other hard assets) your nation has. To succeed, a nation will have citizens that know all TikTok dances by heart and their metaverse avatars own most of the legendary NFT items. Hence I am confident that the US is on the right path!
jollybean 5y ago
The USA is quite different than anywhere else in that: 1) Vast social inequality from issues arising from the ex-slave population and undocumented migrants, which creates a big 'long tail' of social malaise, cost, and limited productivity. and 2) On the high-end, the US has a lot of truly exceptional talent doing truly world-leading things and having a truly global impact, or in other words, they are in some ways 'earning' very high returns. Imagine if Germany were the size of the US: no historical ethnic issues, and more institutional conglomerates instead of newer, cutting edge companies (i.e. more BMW's not more Ubers and AirBnBs'). What would that look like, even with the Seignurage of currency etc? I think inequality would be a lot less. I think the author makes some great points, but they just don't overcome the fundamentally different situation that the US is in vis-a-vis everyone else.
rndmind 5y ago
Quantitative Easing will continue on until all the boomers are happily retired. Give it another 3-6 years, then the Fed is going to "get religion" and you will want to hold hard assets. Until then... its stocks and crypto on a moon mission.
- theonlybutlet 5y ago
  Why do you say 3-6 years, I'm curious?
  - rndmind 5y ago
    I'm actually borrowing that from a podcast I listened to, [ a really good listen here, yewtu.be/watch?v=YyprUlzIpog he mentions this point at 20 minutes 10 seconds ... ] He surmises that the government will encourage the FED to preserve QE until the baby-boomers are finally set and retired. Then the FED will 'get religion' and taper down
    - theonlybutlet 5y ago
      Sounds interesting, I'll check it out, thanks.
Aunche 5y ago
It's so sad to see people blame one of the few parts of government still managed by competent people. Blaming the Federal Reserve for things like inflation or wealth inequality is like blaming a cardiac surgeon on side effects of a triple bypass operation. The fault doesn't lie on the expert who needs to resort to increasingly aggressive interventions to maintain some semblance of stability. It lies on the patient to can't help but endlessly gobble pork. The real "money printing" occurs when Congress decides to fund trillions in spending on debt. The Fed flipping a switch to convert that debt into digital dollars is just something their job obligates them to do. Unlike the government, the private sector can't decide to borrow as much as it likes without impunity. With the government swallowing up a large fraction of the liquidity, in a world without QE, interest rates would skyrocket and the private sector would fall into a downward spiral and we would head straight to another Great Depression.
- ardme 5y ago
  Well isn't the issue here that The Fed enables the reckless behavior of congress by sterilizing the deficits? Yes the root cause is the politicians spending tons of money to get re-elected and running up deficits but they shouldn't be able to get away with it and keep kicking the can down the road. To your last point - of course it's obvious that interest rates are suppressed and if they were allowed to rise it would cause a depression. But if they were not there would be less mal-investment and the zombie companies propped up by debt would soon collapse. It's not that this wouldn't cause pain in the short term but that you can't just eliminate reality and it's going to happen sooner or later. The longer you delay the worse the ultimate recession might be.
  - Aunche 5y ago
    > Well isn't the issue here that The Fed enables the reckless behavior of congress by sterilizing the deficits? Well doctors enable unhealthy people to live unhealthy lifestyles, but nobody blames them for that. They can't just say, "I won't give you blood thinners until you go on a diet." Yes, politicians ought to face consequences, but that is not up to the Fed. It is up to the voters to demand better candidates rather than point their fingers at the Fed. > It's not that this wouldn't cause pain in the short term but that you can't just eliminate reality and it's going to happen sooner or later. It worked out during the Great Depression because all of our rival powers were completely destroyed by WWII. We won't be so lucky this time. China is poised to overtake the US as the top superpower if our economy collapses. In a couple decades, this might not be the case, as they will be facing severe demographic problems.
jseban 5y ago
I keep reading between the lines that the fiscal policies are incentivising and prioritising innovation and higher education and knowledge work, and getting rid of manual labor by automation or outsourcing. Seems like a good thing, the way she is phrasing it is like a conspiracy by the "elite" that just decided to sabotage a prosperous large working class for no particular reason. Technological advancement must play a big part in this.
- analyte123 5y ago
  You are reading incorrectly. Her argument is that the fiscal policies are disincentivizing all labor, which indirectly incentivizes industries that have less dependency on labor, whether skilled or unskilled. She also does not phrase it as a conspiracy to sabotage the working class for no reason, she claims that this is a side effect of maintaining USD as the global reserve currency, a system which benefits some people and afflicts others.
andrewdubinsky 5y ago
It's pretty simple to understand. If I have a money printing machine, the first people to gain will be my friends. The second group will be my friends' friends. They will go around buying up all the stuff worth having. Pretty soon those items will go up in value. A lot. Anyone outside my circle of friends will quickly find these items very expensive. Boom. Asset Bubbles.
- imtringued 5y ago
  Central bank reserves aren't "legal tender".
ItsMonkk 5y ago
From Lyn's past article on Japan it is showed that over the past "lost" decades in Japan, the private sector debt has been dramatically reduced while the public sector debt has taken it's place. I really wish she looked into that for this topic. It's not just the QE, it's not just the lowered interest rates. You need to look at the balance of the money supply compared to the GDP. In America corporate and public debt are ballooning, and that's a direct result of Fed policy. In Japan, even with low interest rates and public debt super high, their money supply is in balance, and so their equality is balanced.
Rury 5y ago
Inequality is innate to our reality. As far as resources go (e.g. land), we live in an anisotropic zero-sum world. Inequality between entities is inevitable in such worlds regardless of economic policy, and becomes more notable as more entities come to exist.
raxxorrax 5y ago
Probably yes? Poorer people do not have assets and their wage isn't as dynamic to keep up with inflation.

212 points by paulsb 5y ago

Well duh! Print lots of money Give it to people who have lots of money (banks) The rich get richer. What is so hard to understand about that? The powers that be decided that an increase in wealth disparity was a price worth paying to keep economic activity happening (that and inflation, interest rates could well balloon over the next decade). An alternative was to print lots of money and give it to poor people. That would still have cause inflation, but improved wealth disparities. But the powers that be do not have that sort of power.

dehrmann 5y ago
> The rich get richer. It depends on if assets appreciate disproportionally more than wages. Remember that poor people have few assets, so they're not getting left behind any more than if there weren't QE. Also remember that the benchmark is actually if there weren't QE. Suppose covid caused a depression because of a lack of Fed intervention. How would people have fared, then? I have opinion on this either way. My point is that it's complicated and hard to say.
- worik 5y ago
  Really? Wages are spent so to not depreciate. Those that use debt to buy assets, hence face interest costs, could suffer terribly if interest rates outpace the value of their assets. An asset price crash would burn then badly (as happened in London property market, if memory serves, in the 1990s)
  - iso1631 5y ago
    Mortgages in the UK aren't like in the US, even now it's rare to have more than a 5 year fix, meaning you buy a property and, if interest rates go up, and prices crash, you're left on the "standard variable rate" 5 years later, paying 10-15%, leading to repossessions (especially if it happens now after 13 years of 2% mortgages), further dropping prices. You can't even remortgage onto a new fix if you're unlucky because the crash wipes out your equity, and you owe more than the property is worth, and in the UK you can't even simply hand the keys back. London average prices went from £80k for an average house price in Jan 1990 and did drop, to £65k by 1992, down 18%. It had recovered to £80k by 1996, and reached £128k by December 1999. Prices continued to increase until 2008 when they reached a high of £298k in October 2007, before dropping back to £245k, another 18% drop. Prices had recovered to their 2007 peak 5 years later, by April 2012, then continued to inflate up £487k in August 2017, where they've been relatively flat, only increasing 8% in the last 4 years. Over that 27 year period house prices increased an average 6.5% per year, with most of that 'value' going to those who leveraged their equity and bought properties to rent out in the late 90s and early 00s. That house price inflation wasn't driven from QE though, but from increased ability for people to pay (partly lower interest rates, but mainly because of increased amount of household budget being available to pay rent as more and more families have two full time working professionals, and younger people live in more and more crowded house shares)
    - worik 5y ago
      I was ten years out by memory! Thanks for that
    - worik 5y ago
      It is reasonable to assert that current asset inflation is due to concentration of wealth generally and COVID stimulation specifically. Generally as the rich get richer they run out of consumption opportunities and must put money somewhere. They buy assets and drive up the prices. Here (Aotearoa) COVID stimulation was not given to banks, but consumption opportunities for anybody with money have decreased, hence asset inflation. We can expect a "correction" if history is anything to go by. It could be a crash (like 1929 or 2008) more likely stagnation in prices and inflation in other sectors (as in the 1970s and 1990s here) Prediction is hard. Especially of the future

steve76 5y ago

[dead]

WalterBright 5y ago

This reminds me of when after WW2 ended in Germany, the old German Mark was repudiated and became worthless. It was replaced with the new Mark, and every German was given the same number of new Marks to jump start the economy. Within a week, the people who had money before the repudiation had money again, and the people who didn't didn't.

hammock 5y ago
Anywhere to read more about this?
- WalterBright 5y ago
  I heard it from people who lived through it. They're all dead now. Wish I had a better reference.
raxxorrax 5y ago
That happened but didn't take assets into account. People that still had them profited very well. There was also a "Lastenausgleich", the English article is quite bad though: https://en.wikipedia.org/wiki/Lastenausgleich https://en.wikipedia.org/wiki/Lastenausgleich Especially the quote about it being the source of the rapid growth period is a bit ridiculous in my opinion.

azth 5y ago

Is this a surprise to anyone? It's simple logic/cause-and-effect. The sooner we move away from fiat money and interest based finance, the better.

dantheman 5y ago

YES

endymi0n 5y ago

TIL that „The Federal Reserve […] is an institution that is mostly privately owned by banks“ Maybe my view is too European on that, but are Americans aware their federal money supervision system is run by banks and how can they possibly be okay with that?

drewvolpe 5y ago
It's owned by banks but run by government appointees. Most Americans who watch the news and follow finance understand it's a public-private hybrid structure. As Lyn notes, this isn't unusual. Many national banks are not owned by the government, including Swiss National Bank.
Ancapistani 5y ago
> Maybe my view is too European on that, but are Americans aware their federal money supervision system is run by banks [...] Honestly, most Americans aren't even aware that monetary policy is a "thing". > and how can they possibly be okay with that? I'd argue that we aren't. The US Constitution explicitly gives Congress the power to "coin Money". The current reading of that phrase is that it only applies to metallic coins, not paper money. Congress then set up the legal structure around the Federal Reserve Bank system - and it's more complicated than "privately owned banks" in practice, due to the blurring of the lines between "public" and "private", and the prescribed structure of the Fed that is at least partially under direct Congressional oversight. I'll also point out that the US has had multiple monetary systems since its inception, and the Federal Reserve System has only existed for about a century.
- nverno 5y ago
  > I'd argue that we aren't It's been a hot-button issue since it was created. If it's characterized as a system run by a bunch of bankers with greedy fingers on the tap, it sounds terrible- if it's a system to stabilize the economy, or any number of its other arguably beneficial purposes, it mightn't sound so bad. All of this things can be true, but without deep knowledge of the system (does anyone really understand all of the interactions?), it's hard to weigh the tradeoffs and so easy to jump to conclusions. I appreciate the desire for the relative simplicity of things like the gold standard. Just reading this article has made me reconsider my opinions on the matter (I was pretty certain QE was a primary mover driver of wealth centralization going in). My intuition tells me there is a lot of misleading correlation here, given how interlinked all these systems are.

gremlinsinc 5y ago

> The Fed’s role has expanded over the years, and its decisions often seem opaque and arbitrary. A small number of unelected people in a room dictate the price of money for a country of 330 million people, and can create new reserves out of thin air, or destroy reserves from the system. I'd much rather there be a liquid democracy voting system where maybe every person w/ a degree in economics gets 1 vote, I'd trust 10k economics majors over 10 rich/wealthy bank owners led by the Rothschilds.

mk81 5y ago

Yes. Anymore questions?

waynecochran 5y ago

I hate acronyms that are not spelled out right at the beginning. Just sayin'

Mikeb85 5y ago
QE has been a topic of mainstream news for a good decade now. Just sayin'.
- waynecochran 5y ago
  TMBT but FWIT TLA's WHW and EHW but JK.
deleted 5y ago
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trutannus 5y ago

The author took way too long to introduce what the abbreviation QE in this context means. It's only in the 5th paragraph. It's generally not a great idea to use an unclear acronym in the title. If you really must, at least do the reader the curtesy of defining it up front, rather than making them dig for it. To someone who's non-American and likely does not keep an eye on the FED, QE isn't likely going to be they way they've seen the idea expressed. You can know what Quantitative Easing is without immediately recognizing QE out of context in a title.

vishnugupta 5y ago
Those who typically visit Lyn Alden’s blog and follow her news letter (as well as her target audience) already know what QE stands for. Besides, now a days with fed so much in the news I suspect it’s becoming widely known which is a good thing.
- trutannus 5y ago
  Yes, that makes sense for those in the US, but the FED does not really factor into the thinking of, for instance, a German. The argument of "if you read the blog you know what it means" somewhat falls flat when the link is posted on HN for people who don't already read the blog to see. Quantitative Easing isn't just an American thing, and plenty of Germans might know it as Quantitative Easing, but have never seen it called QE for various reasons (it's QL in German for sake of example).
  - deleted 5y ago
    [deleted]
  - jasode 5y ago
    >The argument of "if you read the blog you know what it means" somewhat falls flat when the link is posted on HN for people who don't already read the blog to see. I don't understand your complaint here. The author (Lyn Alden) is not the person who posted it here on HN. In any case, she's an American writing about USA policy where her audience already knows what "QE" is. Seems unreasonable that she should predict that a German on HN would be irritated by it.

hammock 5y ago

Lyn Alden always has great analysis.

lancemurdock 5y ago
She is the best. Her premium membership is worth it.

justinzollars 5y ago

It really feels like we are at the end of the road and the Fed is damned if they end QE (deflation and market crash) and dammed if they don't (very high inflation). Ray Dalio does a great job describing the end of the the "long-term debt cycle" and differentiates it from a typical "business cycle" that we are all familiar with [1]. The scary thing he describes is the end of a fiat money system, which will resemble a bank run, but for goods and services rather than for dollars. [1] https://www.linkedin.com/pulse/money-credit-debt-ray-dalio https://www.linkedin.com/pulse/money-credit-debt-ray-dalio

anarticle 5y ago
A run on goods is demand gone wild, aka hyperinflation.
realce 5y ago
Pair this with the reduction of ownership of ANY real assets/goods in the general population. I can't trade my Netflix account for food. I cannot lease my Spotify account to someone for income. I rent my house. I think when you get down to the nitty-gritty, most people actually "own" some furniture, some clothes, and a car. If a crisis actually struck, what goods or services could you actually leverage to survive off of?

Ericson2314 5y ago

The thing is we want less stupid speculation and asset bubbles and yet the economy is running far below potential, with the "tight labor markets" right now just a glimpse of how it was before (and probably a fleeting one if the inflation class warriers have their way like in the 1970s). To fix both problems --- because we need to stop just making ourselves poorer and less coordinated with prudish neoliberalism --- we should probably try to get experimental with monetary policy. Having the Fed tweak a UBI instead might help. Remember, the way that capitalism is supposed to work is that demand validates investment. Easy credit from banks to big institutions with poor consumers is stupid because too many investments still look bad! Hand out cash, and then businesses can chase the people's demand, rather than trying to create the demand all weird post-modernly. No more throwing easy money at startups waiting for them to finally be profittable 10 years later. Yes more making the poorest better off and letting the resulting supply-chain bottlenecks show where investment is actually needed. If there's no current bottleneck, you aren't trying hard enough!

dageshi 5y ago
I'm still yet to understand how a lot of relatively poorly paid work that probably still needs to be done, gets done under UBI. UBI leads to people not doing particular jobs because sitting at home on UBI with less but enough money is preferable. Which means those jobs have to pay more, which leads to inflation which leads to UBI raising to keep up with inflation... repeat?
- WalterSear 5y ago
  UBI isn't unemployment. Less desirable jobs won't need to pay more: income will be in addition to UBI. The only jobs that will need to raise their wages are those that were exploitative to begin with: the ones that rely on people not even having the resources to seek better work.
- deleted 5y ago
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- kelseyfrog 5y ago
  > Which means those jobs have to pay more The assumption being made here is "all other things being equal". All other things are never equal.

photochemsyn 5y ago

It doesn't necessarily, but there are some issues to think about: 1) Interest rates that are low mean that middle-class savings accounts don't grown in size. QE requires low interest rates as I understand it. 2) MMT is linked to QE but guess what, an oligarchic system isn't going to distribute QE capital to middle class and poor people, it's going to go into the pockets of the ruling class. In any case, you really can't trust the corporate economists, and their performance before the 2008-2009 economic crash is proof of that. It's as bad as if the entire climate science community had predicted global cooling and we got global warming instead - clearly, the scientific community would conclude that their models are fundamentally flawed. This of course is why economics professors are safely enclosed in university business departments, so they don't have to face constant ridicule from real scientists.

dragonwriter 5y ago
> MMT is linked to QE No, its not. MMT rejects the fiscal/monetary dichotomy as fiction, and tends to prefer more targeted (traditionally “fiscal”) stimulus, without typical fiscal constraints, because it views the only real constraints on “fiscal” actions as monetary effects; QE is blunt stimulus that respects the classic monetary/fiscal divide that MMT argues against.
bradleyjg 5y ago
> QE requires low interest rates as I understand it. It’s the other way around. QE lowers interest rates; that’s the main purpose. The idea is that low interest rates force investment in risky ventures (since safe ones are offering low yields) and those risky investments on net will generate excess economic growth.
- nybble41 5y ago
  The problem being, of course, that those risky investments were considered "risky" for a reason. A fair assessment, in the absence of forced incentives, would say they're more of a net liability than a net asset. Better than having your funds confiscated, perhaps, but otherwise not worth considering. When they fail (as many of them inevitably will) those failed investments result in waste and economic decline, not growth. And as usual the less-sophisticated investors will bear the lion's share of the losses.

fdgsdfogijq 5y ago

How have people not caught onto this yet? When the Fed prints money, its a guaranteed bet that assets go up. The rich use their wealth and huge amounts of leverage via financial instruments to generate massive returns. This has been going on for a long time. Literally all you need to do is throw your whole bank account into call options. Working a 200k-300k a year job is almost a waste of time with how much money they are printing. This is how the wealthy see it, your small paycheck (yes 300k a year is small) is a joke within the context of financial leverage. Just to reiterate, you are better off risking everything in financial markets and sitting at home watching those assets very closely than you are working.

jliptzin 5y ago
Throwing your whole bank account into call options would be an extremely risky thing to do. But that doesn’t invalidate your point that capital accumulation of wealthy people generally far outweighs any amount of money they would make from their labor. It doesn’t have to be call options though, with enough wealth even interest from T-bills would dwarf a $300k salary.
- fdgsdfogijq 5y ago
  You are still missing the point. With QE, the call options are far less risky than they look. It has been this way for over a decade. People somehow cant get it into their heads, when the fed prints money, assets go up. Capitalists are having an all you can eat buffet while everyone else thinks the only thing they can do is put 3k into the SPY every month. Its a joke
  - whimsicalism 5y ago
    Yes, in "normal times" of the past decade, when you invest in call options, you are basically being compensated for discounting the risk of a crash at any particular moment. But there's no free lunch - the risk you are taking is being priced in, but sometimes the actually risky thing does happen. This line you keep repeating about "only the lower classes" xyz while the "true rich" have some deep wisdom is belied by the fact that rich people become not-so-rich trading options every day. It's straight out of the "this one trick they don't want you to know about" advertising playbook.

acd 5y ago

Qe causes all asset prices to rize in value. That include home loans which also expand. Most people loan to these home. Stock assets rize in price. Yet again higher proportion of these assets tends to be owned by richer classes.

ralusek 5y ago

If you increase the amount of USD, the USD cost of anything that isn't USD goes up. So, a lot of the market gains, housing gains, crypto gains, etc, are at least in some part to do with all of these countries increasing their money supplies. So anybody that has wealth kept in anything other than the inflating currencies is going to win, and anybody who either has savings only in fiat or is paid primarily in fiat is going to lose out. So, yes, of course it causes wealth inequality. The rich can afford to bail on a currency while it balloons.

theonlybutlet 5y ago
This is the interesting thing, and the whole premise of MMT (Modern Monetary Theory), the currency being the reserve currency is not prone to devaluation relative to other currencies which allows them to keep printing USD and in effect exporting their inflation, all until someday something replaces the currency as a reserve. The inequality comes from this excess cash in the market with nowhere productive to be spent on, people merely invest it in the assets they were already going to invest in, driving up asset prices (creating asset bubbles).

havkd 5y ago

Wow, how unbelievably antisemitic.

deleted 5y ago
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88913527 5y ago

When many people have few assets, and few people have many, and you cause the value of assets to go up, the nominal gap between two is larger, but the relative amounts are the same. This is basic math. Suppose we have two individuals who experience 25% growth due to QE: Person A: $1,000 * 25% growth = $1,250 Person B: $1,000,000 * 25% growth = $1,250,000 Originally, the wealth gap between A and B was 1000:1. It remains 1000:1 after the asset appreciation. However, because wage income has long been stagnant, it becomes increasingly difficult for the poorer person to play catch up, because labor income can't scale in the way capital can. Both the proportional change and real change are worth considering when it comes to setting public policy.

kranke155 5y ago
Thomas Picketty - didn’t he show returns on assets far outgain salary growth ?
- bhupy 5y ago
  That was his thesis, but it's since been questioned/refuted: https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf > Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g. https://www.economist.com/briefing/2019/11/28/economists-are-rethinking-the-numbers-on-inequality https://www.economist.com/briefing/2019/11/28/economists-are... http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequality.pdf http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequali... > Top income share estimates based only on individual tax returns, such as Piketty and Saez (2003), are biased by tax-base changes, major social changes, and missing income sources. Addressing these issues requires numerous assumptions, especially for broadening income beyond that reported on tax returns. This paper shows the effects of adjusting for technical tax issues and the sensitivity to alternative assumptions for distributing missing income sources. Our results suggest that top income shares are lower than other tax-based estimates, and since the early 1960s, increasing government transfers and tax progressivity resulted in little change in after-tax top income shares.

lend000 5y ago

An important takeaway from the wealth inequality chart: every time that wealth inequality has substantially decreased in recent history was during a recession. Staving off recessions at all costs for political reasons is a horrible policy. Market cycles are natural; we don't live in a perfect world. Market forces clearing out the inefficiencies/rebalancing power in the economy is better for long term capital allocation in society than socializing losses or printing money to rescue stock indices.

whimsicalism 5y ago
Is inequality the base thing we care about? Or is it only an instrumental way of accessing overall welfare, which is the thing we actually care about? If the latter is true, it seems like causing recessions in order to reduce inequality is at least somewhat akin to to cutting off the nose to spite the face.
TAForObvReasons 5y ago
It's analogous to the forest fires. Recessions, like smaller forest fires, help clear out the dead weight. New entities are able to grow in the wake. By aggressively staving off recessions, the smaller fires are suppressed but it leaves an ever-increasing mass of dead weight ("zombie companies"), eventually leading to an uncontrollable fire
creato 5y ago
I agree that maybe allowing market downturns to occur is probably a good thing. That said, an equally reasonable interpretation of your observation is that maybe inequality is not itself a problem. More inequality doesn't necessarily mean that the poor are worse off than they would be with less inequality. I wonder if we are collectively making a mistake to treat stock ownership as wealth. Stock prices going down reduces wealth inequality, but does that actually help anyone?
- whimsicalism 5y ago
  Regardless of what you treat it is, inequality of ownership of the major enterprises in the US is worth addressing. I do think the US needs substantial reform of how ownership and corporate governance currently works in our system.

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indodima 5y ago

All in all, this is mostly a question of policy (not in terms of typical market regulation through interest rates, money supply etc.) and not only market mechanisms. Individuals with a high "wealth concentration" have a lot more power to pursue their goals ("gain [more] wealth [concentration], forgetting all but self"). Not only economic power, but -most importantly- power to enforce their interests politically. Most western country (especially the US) policies of the last decades pretend to do something for citizens with a low "wealth concentration", but in the end just favor the rich. Analyzing this trend only in economic terms and closing ones eyes (ears and mouth) regarding systematic political manipulation is hypocritical.

hammock 5y ago
Did you read the article? The entire thesis is that monetary policy (what you call "market regulation through interest rates, money supply etc") is not the primary driver of inequality, but rather it's fiscal policy (what you call political interests).

anm89 5y ago

For anyone who is a fan of Lyn, I highly recommend you follow her friend Luke Gromen. He's been doing some excellent analysis over the last few months and is one of the few people producing this kind of content who can match Lyn's depth and breadth. One podcast I liked: https://m.youtube.com/watch?v=csf4fdV-EOQ https://m.youtube.com/watch?v=csf4fdV-EOQ

coolspot 5y ago

It is well known that in the future, it won’t matter how many factories (or other hard assets) your nation has. To succeed, a nation will have citizens that know all TikTok dances by heart and their metaverse avatars own most of the legendary NFT items. Hence I am confident that the US is on the right path!

jollybean 5y ago

The USA is quite different than anywhere else in that: 1) Vast social inequality from issues arising from the ex-slave population and undocumented migrants, which creates a big 'long tail' of social malaise, cost, and limited productivity. and 2) On the high-end, the US has a lot of truly exceptional talent doing truly world-leading things and having a truly global impact, or in other words, they are in some ways 'earning' very high returns. Imagine if Germany were the size of the US: no historical ethnic issues, and more institutional conglomerates instead of newer, cutting edge companies (i.e. more BMW's not more Ubers and AirBnBs'). What would that look like, even with the Seignurage of currency etc? I think inequality would be a lot less. I think the author makes some great points, but they just don't overcome the fundamentally different situation that the US is in vis-a-vis everyone else.

rndmind 5y ago

Quantitative Easing will continue on until all the boomers are happily retired. Give it another 3-6 years, then the Fed is going to "get religion" and you will want to hold hard assets. Until then... its stocks and crypto on a moon mission.

theonlybutlet 5y ago
Why do you say 3-6 years, I'm curious?
- rndmind 5y ago
  I'm actually borrowing that from a podcast I listened to, [ a really good listen here, yewtu.be/watch?v=YyprUlzIpog he mentions this point at 20 minutes 10 seconds ... ] He surmises that the government will encourage the FED to preserve QE until the baby-boomers are finally set and retired. Then the FED will 'get religion' and taper down
  - theonlybutlet 5y ago
    Sounds interesting, I'll check it out, thanks.

Aunche 5y ago

It's so sad to see people blame one of the few parts of government still managed by competent people. Blaming the Federal Reserve for things like inflation or wealth inequality is like blaming a cardiac surgeon on side effects of a triple bypass operation. The fault doesn't lie on the expert who needs to resort to increasingly aggressive interventions to maintain some semblance of stability. It lies on the patient to can't help but endlessly gobble pork. The real "money printing" occurs when Congress decides to fund trillions in spending on debt. The Fed flipping a switch to convert that debt into digital dollars is just something their job obligates them to do. Unlike the government, the private sector can't decide to borrow as much as it likes without impunity. With the government swallowing up a large fraction of the liquidity, in a world without QE, interest rates would skyrocket and the private sector would fall into a downward spiral and we would head straight to another Great Depression.

ardme 5y ago
Well isn't the issue here that The Fed enables the reckless behavior of congress by sterilizing the deficits? Yes the root cause is the politicians spending tons of money to get re-elected and running up deficits but they shouldn't be able to get away with it and keep kicking the can down the road. To your last point - of course it's obvious that interest rates are suppressed and if they were allowed to rise it would cause a depression. But if they were not there would be less mal-investment and the zombie companies propped up by debt would soon collapse. It's not that this wouldn't cause pain in the short term but that you can't just eliminate reality and it's going to happen sooner or later. The longer you delay the worse the ultimate recession might be.
- Aunche 5y ago
  > Well isn't the issue here that The Fed enables the reckless behavior of congress by sterilizing the deficits? Well doctors enable unhealthy people to live unhealthy lifestyles, but nobody blames them for that. They can't just say, "I won't give you blood thinners until you go on a diet." Yes, politicians ought to face consequences, but that is not up to the Fed. It is up to the voters to demand better candidates rather than point their fingers at the Fed. > It's not that this wouldn't cause pain in the short term but that you can't just eliminate reality and it's going to happen sooner or later. It worked out during the Great Depression because all of our rival powers were completely destroyed by WWII. We won't be so lucky this time. China is poised to overtake the US as the top superpower if our economy collapses. In a couple decades, this might not be the case, as they will be facing severe demographic problems.

jseban 5y ago

I keep reading between the lines that the fiscal policies are incentivising and prioritising innovation and higher education and knowledge work, and getting rid of manual labor by automation or outsourcing. Seems like a good thing, the way she is phrasing it is like a conspiracy by the "elite" that just decided to sabotage a prosperous large working class for no particular reason. Technological advancement must play a big part in this.

analyte123 5y ago
You are reading incorrectly. Her argument is that the fiscal policies are disincentivizing all labor, which indirectly incentivizes industries that have less dependency on labor, whether skilled or unskilled. She also does not phrase it as a conspiracy to sabotage the working class for no reason, she claims that this is a side effect of maintaining USD as the global reserve currency, a system which benefits some people and afflicts others.

andrewdubinsky 5y ago

It's pretty simple to understand. If I have a money printing machine, the first people to gain will be my friends. The second group will be my friends' friends. They will go around buying up all the stuff worth having. Pretty soon those items will go up in value. A lot. Anyone outside my circle of friends will quickly find these items very expensive. Boom. Asset Bubbles.

imtringued 5y ago
Central bank reserves aren't "legal tender".

ItsMonkk 5y ago

From Lyn's past article on Japan it is showed that over the past "lost" decades in Japan, the private sector debt has been dramatically reduced while the public sector debt has taken it's place. I really wish she looked into that for this topic. It's not just the QE, it's not just the lowered interest rates. You need to look at the balance of the money supply compared to the GDP. In America corporate and public debt are ballooning, and that's a direct result of Fed policy. In Japan, even with low interest rates and public debt super high, their money supply is in balance, and so their equality is balanced.

Rury 5y ago

Inequality is innate to our reality. As far as resources go (e.g. land), we live in an anisotropic zero-sum world. Inequality between entities is inevitable in such worlds regardless of economic policy, and becomes more notable as more entities come to exist.

raxxorrax 5y ago

Probably yes? Poorer people do not have assets and their wage isn't as dynamic to keep up with inflation.