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Assets going up in value isn't really a wealth transfer by itself. The buyer is just exchanging a lot more cash for an asset worth a lot more. Their wealth does

Assets going up in value isn't really a wealth transfer by itself. The buyer is just exchanging a lot more cash for an asset worth a lot more. Their wealth doesn't change overall. Rents are a different story perhaps. The unfair property taxes in California and similar states is certainly wealth transfer though, which got vastly more unfair.

fny 5y ago
It is an indirect transfer. Central bank balance sheet coupled with debt monetization debases fiat. That means if I worked for an hour and made $10 and your house goes up by 30%, I can buy less house while you can borrow against your house at low interest rates to buy more financial assets or even my time.
danhak 5y ago
Could you please elaborate on what’s unfair about property taxes in California? From what I understand California has some of the lowest property taxes in the country and Prop 13 let owners lock in their tax basis for life.
- xyzzy_plugh 5y ago
  You just described what's unfair. Prop 13 means new owners pay for their neighbors disproportionately. That's wealth transfer.
- bigthymer 5y ago
  Low property taxes inflate house prices. New entrants (e.g. young people) to the market have to pay these inflated prices.
usrusr 5y ago
It's a transfer from those who have a high fraction of their net worth in cash equivalents to those whose cash fraction is low or even negative. Nobody actually has a million dollars (well, maybe except for some who have a lot of laundering ahead of them?), but plenty of smallish "emergency funds" or "future downpayments" in deprecating savings accounts.
- medvezhenok 5y ago
  And a transfer from those earning salaries as well, even if the salaries keep up with inflation (due to the Cantillon effect - the holders of capital will have access to the money first, so they can use it before it's "fully devalued", versus wage indexing which comes later).
medvezhenok 5y ago
It is actually a wealth transfer. Think of houses as denominated not in USD, but in labor hours (let's say median wage). If the house price appreciates in labor hours, that is actually a wealth transfer from those performing labor to those holding on to capital (and vice versa). In reality it's a little bit more complicated since the financing cost of the house has to be considered (principal + interest over the lifetime of the loan), instead of the notional value of the house (and refinancing throws another wrench into the equation). But as a first order approximation, if houses got more expensive in labor-hours then that's a transfer from labor to capital (and a "hidden" tax on anyone holding USD).
- simplestats 5y ago
  So labor is wealth now? This is the same argument again. I could also discover oil on my property, or build a bigger house on it with my own labor, or all the other houses could get destroyed in an earthquake. Or, on the other side, someone could invent a new process or tool that makes your skills obsolete. Or a million immigrants could show up and bid labor prices down. These all change the amount of labor I will want in return for my house. But none are wealth transfer. Labor is how wealth is produced but it is not wealth itself.
  - medvezhenok 5y ago
    Yes, real wealth (and paper wealth) shifts around constantly depending on external factors, including all of the factors you listed above. Wealth is just optionality - if my house is worth $1M I have more options than if the my house is worth $500K, even if it is the same exact house. Yes, labor is how wealth is produced, but in a sense, an individual's labor is more than that: a person's unrealized wealth is the discounted future value of their lifetime income minus necessary survival expenses. That's not a constant number - it depends on the individual's choices, but nevertheless, that is some number. And that number has some associated optionality. If we increase the price of houses, the optionality associated with that future stream of earnings decreases, and therefore I believe that wealth has actually been transferred (since the optionality of the homeowner increases)

fny 5y ago

It is an indirect transfer. Central bank balance sheet coupled with debt monetization debases fiat. That means if I worked for an hour and made $10 and your house goes up by 30%, I can buy less house while you can borrow against your house at low interest rates to buy more financial assets or even my time.

danhak 5y ago

Could you please elaborate on what’s unfair about property taxes in California? From what I understand California has some of the lowest property taxes in the country and Prop 13 let owners lock in their tax basis for life.

xyzzy_plugh 5y ago
You just described what's unfair. Prop 13 means new owners pay for their neighbors disproportionately. That's wealth transfer.
bigthymer 5y ago
Low property taxes inflate house prices. New entrants (e.g. young people) to the market have to pay these inflated prices.

usrusr 5y ago

It's a transfer from those who have a high fraction of their net worth in cash equivalents to those whose cash fraction is low or even negative. Nobody actually has a million dollars (well, maybe except for some who have a lot of laundering ahead of them?), but plenty of smallish "emergency funds" or "future downpayments" in deprecating savings accounts.

medvezhenok 5y ago
And a transfer from those earning salaries as well, even if the salaries keep up with inflation (due to the Cantillon effect - the holders of capital will have access to the money first, so they can use it before it's "fully devalued", versus wage indexing which comes later).

medvezhenok 5y ago

It is actually a wealth transfer. Think of houses as denominated not in USD, but in labor hours (let's say median wage). If the house price appreciates in labor hours, that is actually a wealth transfer from those performing labor to those holding on to capital (and vice versa). In reality it's a little bit more complicated since the financing cost of the house has to be considered (principal + interest over the lifetime of the loan), instead of the notional value of the house (and refinancing throws another wrench into the equation). But as a first order approximation, if houses got more expensive in labor-hours then that's a transfer from labor to capital (and a "hidden" tax on anyone holding USD).

simplestats 5y ago
So labor is wealth now? This is the same argument again. I could also discover oil on my property, or build a bigger house on it with my own labor, or all the other houses could get destroyed in an earthquake. Or, on the other side, someone could invent a new process or tool that makes your skills obsolete. Or a million immigrants could show up and bid labor prices down. These all change the amount of labor I will want in return for my house. But none are wealth transfer. Labor is how wealth is produced but it is not wealth itself.
- medvezhenok 5y ago
  Yes, real wealth (and paper wealth) shifts around constantly depending on external factors, including all of the factors you listed above. Wealth is just optionality - if my house is worth $1M I have more options than if the my house is worth $500K, even if it is the same exact house. Yes, labor is how wealth is produced, but in a sense, an individual's labor is more than that: a person's unrealized wealth is the discounted future value of their lifetime income minus necessary survival expenses. That's not a constant number - it depends on the individual's choices, but nevertheless, that is some number. And that number has some associated optionality. If we increase the price of houses, the optionality associated with that future stream of earnings decreases, and therefore I believe that wealth has actually been transferred (since the optionality of the homeowner increases)