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The rich are generally net lenders so low real interest rates should hurt them. Yes asset prices seem to be going up, but asset prices should generally stay th
by aeternum 5y ago
The rich are generally net lenders so low real interest rates should hurt them. Yes asset prices seem to be going up, but asset prices should generally stay the same in real terms.
The poor are generally net borrowers so low interest rates have for most of history been considered good for the poor.
Very recently wages have not kept up especially real wages. I think most of that has to do with globalization. IE US wages have lagged while China/India has seen above average wage growth. Basically you have much of the US workforce saying 'I make twice as much as my parents did at my age, why can't I afford a house?' But in real terms, their parents' labor was valued significantly higher than their labor currently is. The world was a different and less connected place back then so there was much less international wage competition.
- llimos 5y agoWhat does "net lenders" mean? The rich use debt extensively to invest in assets. They're not lending the money out. They borrow way more than the poor, and buy assets.
- aeternum 5y agoA loan is an asset to the person that made the loan. Yes some of the rich use leverage to increase the amounts they can put towards assets / lend out. In general though they are still net lenders. For example it is very unlikely that a rich person with 100mil would take out additional leverage for another 50mil and let that 150mil just sit in cash. Doing that would make them a net borrower (of 50mil). Instead, they will invest that 150mil, suppose they decide to buy a bundle of mortgage-backed securities. They now have an asset worth 150mil, and via the txn they are effectively lending 150mil worth of value to homeowners. Even with the 50mil loan, they are still a 100mil net lender.