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Wealth inequality did this. It would have happened with or without the fed. As long as r > g the problem will only get worse. If the US returned to a 1950s sty

by pydry 5y ago

Wealth inequality did this. It would have happened with or without the fed. As long as r > g the problem will only get worse. If the US returned to a 1950s style tax system or enacted very high wealth taxes this problem could be avoided, but the forces arrayed against you for proposing such reforms would mean political suicide for anyone who does it. Which makes me think that the problem will get worse until some sort of structural break occurs (at which point, as with 2008, it'll probably get worse at an accelerated rate with a cure worse than the disease).

FredPret 5y ago
r cannot possibly be greater than g over the long term. It’ll revert to the mean. Even if it’s greater than g due to an exceptional investor like Warren Buffet, eventually his heirs will take over, and they are likely not as good as he is. It is profoundly hard and unusual to keep a family rich for many generations.
- pydry 5y ago
  Of course not. The reversion to mean will probably happen as a result of a violent structural break, though, not as a gradual reversal. This means economic or political crisis. And, the same people who were made so fantastically rich from r > g will likely be the ones deciding what to do about it. It's not like governments will wake up from their stupor and implement a basic income. Whatever happens (fascism, war, financial crisis), it'll likely make us wish for the good old days of right here and now. I'm almost more afraid of the structural break than I am the inexorable rise of wealth inequality.
- patentatt 5y ago
  > r cannot possibly be greater than g over the long term. Thomas Piketty would like to have a word with you. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
  - dcolkitt 5y ago
    Piketty’s empirical research has been thoroughly refuted and found to have major gaps that it’s not even funny anymore. This is why he hasn’t won the Nobel, for research that if actually accurate would have otherwise been a shoe in for the prize. https://marginalrevolution.com/marginalrevolution/2014/05/what-do-the-piketty-data-problems-really-mean.html https://marginalrevolution.com/marginalrevolution/2014/05/wh...
    - pydry 5y ago
      >Piketty’s empirical research has been thoroughly refuted Your link is somebody arguing that perhaps the data doesnt look so bad if you squint at it in the right light. It's not a refutation. it's not even a rebuttal. It's basically disapproving FUD - "oh well if you pretend the 2008 housing bubble never happened things dont look quite so bad...". Um, ok? There's even a little plea at the end for the reader to "understand that this is all very complicated and hard to understand". How scientific. Of course, it is quite complicated sometimes and when he tries to break it down himself he gets himself in knots trying to defend inequality: https://www.nakedcapitalism.com/2012/11/desperate-effort-by-tyler-cowen-and-megan-mcardle-to-silence-discussion-about-income-inequality.html https://www.nakedcapitalism.com/2012/11/desperate-effort-by-...
      - dcolkitt 5y ago
        It's absolutely a rebuttal. If you're making a statistical/empirical claim, especially one that goes against orthodox economic theory, than robustness to the underlying assumptions is really important. Subsequently empirical research has found that Piketty's conclusions are extremely sensitive to the way he slices the historical data and the modeling parameters. At best that's evidence of an incompetent econometrician who doesn't understand the tools enough to perform the required robustness checks. At worse, it's evidence of data snooping to shoehorn the the results into a pre-determined hypothesis. But you don't have to take my word for it. The IMF itself performed an exhaustive robustness check and found that Piketty's conclusions simply don't hold up: https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf
- marcosdumay 5y ago
  > r cannot possibly be greater than g over the long term With government intervention, this can last for as long as the government lasts.
  - FredPret 5y ago
    r is a result of g. Governments are subject to math, even if it takes a while for the numbers to add up to a problem.
    - marcosdumay 5y ago
      Of course, it's not forever, and Piketty's conclusion that capitalism is not viable is wrong because of that. But it can last for a really long time, and if something lasts for more than your lifetime, do you really care that it's finite.
    - pydry 5y ago
      r is not intrinsically a result of g, even if they are "supposed" to move in lockstep. The soviet union had g without corresponding r. A high g just makes a high r easier to stomach. Inequality doesnt really have an inbuilt limit as such and we are still a way off people owning entire countries, which wouldnt be without historical precedent.
bogota 5y ago
How does a wealth tax help? I make 400k a year and can’t afford to buy anything. Even taking half of all the richest peoples wealth in the US does nothing to help. What would the government do? They spend that in a year. Wealth tax is a brain dead argument and I haven’t seen anyone explain how it would help the average person in anyway.
ldjkfkdsjnv 5y ago
No wealth inequality is coming from monetary policy. Its too cheap to borrow money and invest with it. Theres an equilibrium. People dont understand, when you make the interest rate on money so low, people can borrow billions and throw it into new assets, running the cost up on those assets. Thats whats happening with housing, cheap money is buying housing and generating a return
- pydry 5y ago
  Had monetary policy not made borrowing cheap the wealthy would be lending everybody cash at high interest rates instead of buying up and renting out houses none of us can afford. The net effect would be the same. It doesnt restructure everybody's relationship to capital it just restructures the form in which capital gets hoarded and deployed.
  - dasil003 5y ago
    IANAE but this doesn't track, the amount of money people are willing to borrow at a high interest rate is less than what they are willing to borrow at a low interest rate.
    - pydry 5y ago
      Yeah, absolutely true. A high interest rate with high wealth inequality just means that the wealthy suck wealth from the middle classes by lending out money instead of renting out property. Either way you're still getting screwed it's just the delivery method that changes.
      - dasil003 5y ago
        How are you quantifying this? I've spent most of my life very middle class and I always had to pay rent, but I only rarely had to borrow money.
        djbusby 5y ago
captainredbeard 5y ago
1. The US didn't have a "wealth tax" in the 1950s, it had a very high marginal income tax rate which applied to a tiny slice of earners. 2. A wealth tax would be hard / impossible to implement.
- triceratops 5y ago
  > A wealth tax would be hard / impossible to implement. What do you think property taxes are? I agree it would be really hard to tax all forms of wealth. But I'm fine with rich people hiding their wealth in artwork or stamps or whatever to save it from taxation. Keeps the money out of useful assets like stocks and houses.
  - plasticchris 5y ago
    Stocks /and/ houses? How does stock have utility anything like housing?
    - tanseydavid 5y ago
      If you are seeking to become a residential home owner (occupied primary residence) then the utility of the real estate is quite different as you note. If you are purely an investor then the utility of equities vs. real estate is the same -- it is an investment.
    - sokoloff 5y ago
      If an operating business has utility, then owning a fraction of that operating business has utility.
  - sokoloff 5y ago
    One massive difference: Property taxes are state and local taxes, which are not barred by the Constitution in the way that federal property/wealth taxes very likely are (absent an amendment, of course). (There is debate on this point; I personally find the side arguing that such a tax would not be barred as needing to use fairly tortured lines of reasoning to arrive at their conclusion.) If you can’t pass a wealth tax federally, then whatever state wanted to compete on having a low/zero wealth tax would find plenty of wealthy takers as residents.
notch656a 5y ago
Wealth inequality isn't the problem IMO. Regulation, housing codes, zoning, and taxes are why housing is expensive. Let me build a yurt as primary residence on a 30x30ft dirt plot if I like; it would suit my family fine and get the job of housing done for under $50k yet in most cities this would be near impossible. Even in city, land isn't that expensive outside the coasts. It's building up to code, while being restricted into what your zoning locks in, while maintaining all the permits and paying year after year of property tax.
- svachalek 5y ago
  The book Strong Towns covers this extensively. The modern standard of doing all new development at the peak standards basically ensures that neighborhoods can only ever go downhill, and leads to all kinds of other problems. It's a good read.
bufferoverflow 5y ago
- pydry 5y ago
  >And this wealth inequality is mostly caused by people making dumb choices. It was caused by economic parasites, not choices. I know a fair number of people who inherited property and do almost no productive work. They live lavish lifestyles and live almost entirely off the hard work of others while their wealth - the result of the hard work of others - both grows and sustains them. I know a fair few others who are worth to society far in excess of what they are paid and have very little left of that once bills from monopolies, rent and taxes are accounted for. At some point this system breaks down completely.
  - cellis 5y ago
    Been going pretty well for about 1000 years now. ( how many revolutions have there been in the last 1000 years, and did wealthy people stop being wealthy? )
- 542458 5y ago
  There are only about ~180,000 people with gender studies degrees in the US. I don’t think that’s responsible for an entire generation’s struggles. Furthermore, the average wage for somebody with such a degree is ~83K, which is pretty respectable. https://datausa.io/profile/cip/cultural-gender-studies https://datausa.io/profile/cip/cultural-gender-studies The idea that genders studies degrees are to blame seems a bit like blaming avocado toast to me.
  - bufferoverflow 5y ago
- AlwaysRock 5y ago
  > wealth inequality is mostly caused by people making dumb choices. Like getting a college degree that doesn't give you any marketable skills. What a miss. Teenagers being handed checks for 100K+ to study topics that wont get them a job is the fault of the... teenager? Maybe we should focus on outcomes from colleges instead of enrollments. Maybe high schooler guidance considers should actually help students discover career paths? Maybe financial institution shouldnt give teenagers unforgivable loans they will never be able to pay back? Maybe as a society we shouldnt set the standard that one has to and needs to go to college by and large to be successful? There are a whole slew of things that cause wealth inequality but blaming it on someone taking a check to study a subject that doesnt translate to a real world job is so low on the list of concerns it shouldnt even be a part of the conversation.
phkahler 5y ago
>> Wealth inequality did this No. Just like the student loan crisis, when you make borrowing money really easy it drives prices up. Home prices vary inversely with interest rates. Student tuition well that's even worse because the risk to the bank is zero (because the government is backing those loans). Unfortunately some people think they can spend their way out of problems without making worse problems - I'm looking at congress here. As they say, when you're in a hole the first thing you need to do is STOP DIGGING. For personal finance this involves cutting up credit cards so you can't go further into debt. For the loans they need to stop talking about the government paying them off (or some of them) and STOP guaranteeing them - then we can talk about the people who are already fucked. For everything else we need the Fed to increase interest rates to a good 3 percent or so. Yeah that will tank the economy short term, but I say so what it's already going to crash lets get through the pain and straighten things out.
- pydry 5y ago
  >No. Just like the student loan crisis, when you make borrowing money really easy it drives prices up. Of course it does. However, the net result of lowering interest rates is just that the middle class pays through the nose for assets (housing) instead of for money (debt service). The parasite sucks the same money from a different location. Wealth inequality with high interest rates and with low interest rates are two sides of a very similar coin. The only real fix is to tax the rich.
- secabeen 5y ago
  > No. Just like the student loan crisis, when you make borrowing money really easy it drives prices up. Home prices vary inversely with interest rates. Student tuition well that's even worse because the risk to the bank is zero (because the government is backing those loans). This is unrelated to housing, but you have the order backwards. Prices went up, and students took out loans to pay them. The root cause of the increases in higher ed tuition is dis-investment in higher education by state legislatures, not increases in expenditures by colleges. Given that most colleges are state-run or non-profits, they can't just increase prices and dump the proceeds into profits; they have to spend the money they bring in, and I have yet to see any evidence that universities are spending 100% more (or any large number that scales with the recent increases in tuition) on a real per-full-time-student-equivalent basis. https://fivethirtyeight.com/features/fancy-dorms-arent-the-main-reason-tuition-is-skyrocketing/ https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...
closeparen 5y ago
Wealth inequality did this all right, but that wealth didn't come from wages and you can't touch it with income taxes. The unconscionably wealthy in today's world are ordinary, sympathetic, everyday "middle class" families who own the land in productive cities.
- lovich 5y ago
  By definition you can be “unconscionably wealthy” and be middle class.
- pydry 5y ago
  If it became impossible to convert it into income without paying 98% tax for sure its price would fall eventually. However, it probably wouldnt be the most effective way of extracting that wealth. A lot of families would try to restructure their holdings to convert income into unrealized capital gains and try to wait a few decades until the tax could be brought down again.
  - closeparen 5y ago
    The wealth is the ability to live in a desirable place, that is structured so not many others can live there. You could mess with the accounting or the liquidity, but it is still wealth that few people have and most people don't. In fact most such real estate multimillionaires are not interested in cashing out. Only in continuing to live there, and making sure that not too many other people start to live there. Liquidity is worth something so it would reduce the price somewhat, but I don't think it's central.
spaetzleesser 5y ago
"If the US returned to a 1950s style tax system or enacted very high wealth taxes this problem could be avoided, but the forces arrayed against you for proposing such reforms would mean political suicide for anyone who does it. " It's also a culture thing. Companies used to accept some level of social responsibility outside of making money. The shareholder value over everything else since the 80s broke social contracts and made it ok for wealthy people to only look after themselves. I think we have to get back to a place where it's shameful for companies to lay off people while making record profits and paying bonuses to execs.
logicchains 5y ago
Current monetary policy is literally a massive transfer of purchasing power from currency holders (poor and middle-class people who keep their savings in cash or low-interest bank accounts) to the first people to spend the money, which is the people and institutions working in the financial system. If I counterfeit a billion dollars and go out and spend it all, I've got more stuff and everyone else is a little bit poorer. If the central bank prints a bunch of money and lends it to its buddies in the finance industry for near-zero interest rates, they get more stuff and everyone else gets a little poorer. Now this argument wouldn't apply if it was possible for the average person to borrow money directly from the central bank at the same near-zero interest rate the banks pay, but that isn't the case.
- arcticbull 5y ago
  > Now this argument wouldn't apply if it was possible for the average person to borrow money directly from the central bank at the same near-zero interest rate the banks pay, but that isn't the case. Any time you take out a mortgage (at well below inflation by the way) you are obtaining new money "from the printer." The same is true any time you take out a loan. This whole cantillon effect business is trotted out and flogged each time we mention economics on here but as far as I can tell, nobody has ever even attempted to quantify the impact of the cantillon effect. > If I counterfeit a billion dollars and go out and spend it all, I've got more stuff and everyone else is a little bit poorer. If the central bank prints a bunch of money and lends it to its buddies in the finance industry for near-zero interest rates, they get more stuff and everyone else gets a little poorer. This isn't actually true. Japan tripled its M2 money supply since 1990 but both CPI and housing CPI remain dead-ass flat. This model is way too simplistic. Which is why it was thrown out alongside the rest of Austrian economics. Things that seem intuitive aren't always right.
- pmastela 5y ago
  I believe there’s a name for what you’re describing: the Cantillon Effect. > An 18th century French banker and philosopher named Richard Cantillon noticed an early version of this phenomenon in a book he wrote called ‘An Essay on Economic Theory.’ His basic theory was that who benefits when the state prints a bunch of money is based on the institutional setup of that state. In the 18th century, this meant that the closer you were to the king and the wealthy, the more you benefitted, and the further away you were, the more you were harmed. Money, in other words, is not neutral. This general observation, that money printing has distributional consequences that operate through the price system, is known as the “Cantillon Effect.” [1] 1: https://mattstoller.substack.com/p/the-cantillon-effect-why-wall-street https://mattstoller.substack.com/p/the-cantillon-effect-why-...
ajsnigrutin 5y ago
I live in a former communist country where taxes are still higher than 1950s US were, and our housing system is as fucked as yours. There are two problems... first is, that "back then" you could build (almost) whatever, wherever, and people built stuff, now with NIMBY-ism and regulations, you can't anymore. The second problem (the larger one) is, that what was once a thing you bought, because you needed one, and sold, because you moved somewhere else, is now an investment... noone invests in cars, in pasta, nor in pretty much anything that degrades with time.... somehow the housing market got so bubbled up, that it's worth it to buy a house, and instead of prices going down as it ages, the prices actually go up. Limiting investments or limiting number of houses a person can own, would solve a lot of those problems.
szundi 5y ago
No, Quantitative Easing has this effect: asset prices go up. This itself causes rich (asset owning) people more rich. Until the crash.
lend000 5y ago
As I frequently try to point out, wealth inequality seems to only meaningfully decrease during market corrections, which the Fed is determined to prevent at all costs, despite the side effect of increasing wealth inequality (which could be a feature rather than a bug) [0]. The more the Fed distorts normal market signals, like interest rates, the less efficiently capital is allocated, and so the wealth distribution morphs from one that roughly represents human skill at allocating capital to an extremely top-heavy skewed chart that rewards incumbents. [0] https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134
- 0x4d464d48 5y ago
  "(which could be a feature rather than a bug)" Exactly! Thank you. Simple explanations are usually far more useful than ideological and narrative driven ones.
ChrisLomont 5y ago
>If the US returned to a 1950s style tax system Of if consumers bought 1950 style houses there would be no problem, since they're incredibly cheap. Massive increases in the stuff people want in a house over the past half century have driven prices more than anything. Triple or quadruple the area, expect triple or quadruple the inflation adjusted cost. And that is the majority of the cost increase.

by pydry 5y ago

FredPret 5y ago

r cannot possibly be greater than g over the long term. It’ll revert to the mean. Even if it’s greater than g due to an exceptional investor like Warren Buffet, eventually his heirs will take over, and they are likely not as good as he is. It is profoundly hard and unusual to keep a family rich for many generations.

pydry 5y ago
Of course not. The reversion to mean will probably happen as a result of a violent structural break, though, not as a gradual reversal. This means economic or political crisis. And, the same people who were made so fantastically rich from r > g will likely be the ones deciding what to do about it. It's not like governments will wake up from their stupor and implement a basic income. Whatever happens (fascism, war, financial crisis), it'll likely make us wish for the good old days of right here and now. I'm almost more afraid of the structural break than I am the inexorable rise of wealth inequality.
patentatt 5y ago
> r cannot possibly be greater than g over the long term. Thomas Piketty would like to have a word with you. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
- dcolkitt 5y ago
  Piketty’s empirical research has been thoroughly refuted and found to have major gaps that it’s not even funny anymore. This is why he hasn’t won the Nobel, for research that if actually accurate would have otherwise been a shoe in for the prize. https://marginalrevolution.com/marginalrevolution/2014/05/what-do-the-piketty-data-problems-really-mean.html https://marginalrevolution.com/marginalrevolution/2014/05/wh...
  - pydry 5y ago
    >Piketty’s empirical research has been thoroughly refuted Your link is somebody arguing that perhaps the data doesnt look so bad if you squint at it in the right light. It's not a refutation. it's not even a rebuttal. It's basically disapproving FUD - "oh well if you pretend the 2008 housing bubble never happened things dont look quite so bad...". Um, ok? There's even a little plea at the end for the reader to "understand that this is all very complicated and hard to understand". How scientific. Of course, it is quite complicated sometimes and when he tries to break it down himself he gets himself in knots trying to defend inequality: https://www.nakedcapitalism.com/2012/11/desperate-effort-by-tyler-cowen-and-megan-mcardle-to-silence-discussion-about-income-inequality.html https://www.nakedcapitalism.com/2012/11/desperate-effort-by-...
    - dcolkitt 5y ago
      It's absolutely a rebuttal. If you're making a statistical/empirical claim, especially one that goes against orthodox economic theory, than robustness to the underlying assumptions is really important. Subsequently empirical research has found that Piketty's conclusions are extremely sensitive to the way he slices the historical data and the modeling parameters. At best that's evidence of an incompetent econometrician who doesn't understand the tools enough to perform the required robustness checks. At worse, it's evidence of data snooping to shoehorn the the results into a pre-determined hypothesis. But you don't have to take my word for it. The IMF itself performed an exhaustive robustness check and found that Piketty's conclusions simply don't hold up: https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf
marcosdumay 5y ago
> r cannot possibly be greater than g over the long term With government intervention, this can last for as long as the government lasts.
- FredPret 5y ago
  r is a result of g. Governments are subject to math, even if it takes a while for the numbers to add up to a problem.
  - marcosdumay 5y ago
    Of course, it's not forever, and Piketty's conclusion that capitalism is not viable is wrong because of that. But it can last for a really long time, and if something lasts for more than your lifetime, do you really care that it's finite.
  - pydry 5y ago
    r is not intrinsically a result of g, even if they are "supposed" to move in lockstep. The soviet union had g without corresponding r. A high g just makes a high r easier to stomach. Inequality doesnt really have an inbuilt limit as such and we are still a way off people owning entire countries, which wouldnt be without historical precedent.

bogota 5y ago

How does a wealth tax help? I make 400k a year and can’t afford to buy anything. Even taking half of all the richest peoples wealth in the US does nothing to help. What would the government do? They spend that in a year. Wealth tax is a brain dead argument and I haven’t seen anyone explain how it would help the average person in anyway.

ldjkfkdsjnv 5y ago

No wealth inequality is coming from monetary policy. Its too cheap to borrow money and invest with it. Theres an equilibrium. People dont understand, when you make the interest rate on money so low, people can borrow billions and throw it into new assets, running the cost up on those assets. Thats whats happening with housing, cheap money is buying housing and generating a return

pydry 5y ago
Had monetary policy not made borrowing cheap the wealthy would be lending everybody cash at high interest rates instead of buying up and renting out houses none of us can afford. The net effect would be the same. It doesnt restructure everybody's relationship to capital it just restructures the form in which capital gets hoarded and deployed.
- dasil003 5y ago
  IANAE but this doesn't track, the amount of money people are willing to borrow at a high interest rate is less than what they are willing to borrow at a low interest rate.
  - pydry 5y ago
    Yeah, absolutely true. A high interest rate with high wealth inequality just means that the wealthy suck wealth from the middle classes by lending out money instead of renting out property. Either way you're still getting screwed it's just the delivery method that changes.
    - dasil003 5y ago
      How are you quantifying this? I've spent most of my life very middle class and I always had to pay rent, but I only rarely had to borrow money.
      - djbusby 5y ago

captainredbeard 5y ago

1. The US didn't have a "wealth tax" in the 1950s, it had a very high marginal income tax rate which applied to a tiny slice of earners. 2. A wealth tax would be hard / impossible to implement.

triceratops 5y ago
> A wealth tax would be hard / impossible to implement. What do you think property taxes are? I agree it would be really hard to tax all forms of wealth. But I'm fine with rich people hiding their wealth in artwork or stamps or whatever to save it from taxation. Keeps the money out of useful assets like stocks and houses.
- plasticchris 5y ago
  Stocks /and/ houses? How does stock have utility anything like housing?
  - tanseydavid 5y ago
    If you are seeking to become a residential home owner (occupied primary residence) then the utility of the real estate is quite different as you note. If you are purely an investor then the utility of equities vs. real estate is the same -- it is an investment.
  - sokoloff 5y ago
    If an operating business has utility, then owning a fraction of that operating business has utility.
- sokoloff 5y ago
  One massive difference: Property taxes are state and local taxes, which are not barred by the Constitution in the way that federal property/wealth taxes very likely are (absent an amendment, of course). (There is debate on this point; I personally find the side arguing that such a tax would not be barred as needing to use fairly tortured lines of reasoning to arrive at their conclusion.) If you can’t pass a wealth tax federally, then whatever state wanted to compete on having a low/zero wealth tax would find plenty of wealthy takers as residents.

notch656a 5y ago

Wealth inequality isn't the problem IMO. Regulation, housing codes, zoning, and taxes are why housing is expensive. Let me build a yurt as primary residence on a 30x30ft dirt plot if I like; it would suit my family fine and get the job of housing done for under $50k yet in most cities this would be near impossible. Even in city, land isn't that expensive outside the coasts. It's building up to code, while being restricted into what your zoning locks in, while maintaining all the permits and paying year after year of property tax.

svachalek 5y ago
The book Strong Towns covers this extensively. The modern standard of doing all new development at the peak standards basically ensures that neighborhoods can only ever go downhill, and leads to all kinds of other problems. It's a good read.

bufferoverflow 5y ago

pydry 5y ago
>And this wealth inequality is mostly caused by people making dumb choices. It was caused by economic parasites, not choices. I know a fair number of people who inherited property and do almost no productive work. They live lavish lifestyles and live almost entirely off the hard work of others while their wealth - the result of the hard work of others - both grows and sustains them. I know a fair few others who are worth to society far in excess of what they are paid and have very little left of that once bills from monopolies, rent and taxes are accounted for. At some point this system breaks down completely.
- cellis 5y ago
  Been going pretty well for about 1000 years now. ( how many revolutions have there been in the last 1000 years, and did wealthy people stop being wealthy? )
542458 5y ago
There are only about ~180,000 people with gender studies degrees in the US. I don’t think that’s responsible for an entire generation’s struggles. Furthermore, the average wage for somebody with such a degree is ~83K, which is pretty respectable. https://datausa.io/profile/cip/cultural-gender-studies https://datausa.io/profile/cip/cultural-gender-studies The idea that genders studies degrees are to blame seems a bit like blaming avocado toast to me.
- bufferoverflow 5y ago
AlwaysRock 5y ago
> wealth inequality is mostly caused by people making dumb choices. Like getting a college degree that doesn't give you any marketable skills. What a miss. Teenagers being handed checks for 100K+ to study topics that wont get them a job is the fault of the... teenager? Maybe we should focus on outcomes from colleges instead of enrollments. Maybe high schooler guidance considers should actually help students discover career paths? Maybe financial institution shouldnt give teenagers unforgivable loans they will never be able to pay back? Maybe as a society we shouldnt set the standard that one has to and needs to go to college by and large to be successful? There are a whole slew of things that cause wealth inequality but blaming it on someone taking a check to study a subject that doesnt translate to a real world job is so low on the list of concerns it shouldnt even be a part of the conversation.

phkahler 5y ago

>> Wealth inequality did this No. Just like the student loan crisis, when you make borrowing money really easy it drives prices up. Home prices vary inversely with interest rates. Student tuition well that's even worse because the risk to the bank is zero (because the government is backing those loans). Unfortunately some people think they can spend their way out of problems without making worse problems - I'm looking at congress here. As they say, when you're in a hole the first thing you need to do is STOP DIGGING. For personal finance this involves cutting up credit cards so you can't go further into debt. For the loans they need to stop talking about the government paying them off (or some of them) and STOP guaranteeing them - then we can talk about the people who are already fucked. For everything else we need the Fed to increase interest rates to a good 3 percent or so. Yeah that will tank the economy short term, but I say so what it's already going to crash lets get through the pain and straighten things out.

pydry 5y ago
>No. Just like the student loan crisis, when you make borrowing money really easy it drives prices up. Of course it does. However, the net result of lowering interest rates is just that the middle class pays through the nose for assets (housing) instead of for money (debt service). The parasite sucks the same money from a different location. Wealth inequality with high interest rates and with low interest rates are two sides of a very similar coin. The only real fix is to tax the rich.
secabeen 5y ago
> No. Just like the student loan crisis, when you make borrowing money really easy it drives prices up. Home prices vary inversely with interest rates. Student tuition well that's even worse because the risk to the bank is zero (because the government is backing those loans). This is unrelated to housing, but you have the order backwards. Prices went up, and students took out loans to pay them. The root cause of the increases in higher ed tuition is dis-investment in higher education by state legislatures, not increases in expenditures by colleges. Given that most colleges are state-run or non-profits, they can't just increase prices and dump the proceeds into profits; they have to spend the money they bring in, and I have yet to see any evidence that universities are spending 100% more (or any large number that scales with the recent increases in tuition) on a real per-full-time-student-equivalent basis. https://fivethirtyeight.com/features/fancy-dorms-arent-the-main-reason-tuition-is-skyrocketing/ https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...

closeparen 5y ago

Wealth inequality did this all right, but that wealth didn't come from wages and you can't touch it with income taxes. The unconscionably wealthy in today's world are ordinary, sympathetic, everyday "middle class" families who own the land in productive cities.

lovich 5y ago
By definition you can be “unconscionably wealthy” and be middle class.
pydry 5y ago
If it became impossible to convert it into income without paying 98% tax for sure its price would fall eventually. However, it probably wouldnt be the most effective way of extracting that wealth. A lot of families would try to restructure their holdings to convert income into unrealized capital gains and try to wait a few decades until the tax could be brought down again.
- closeparen 5y ago
  The wealth is the ability to live in a desirable place, that is structured so not many others can live there. You could mess with the accounting or the liquidity, but it is still wealth that few people have and most people don't. In fact most such real estate multimillionaires are not interested in cashing out. Only in continuing to live there, and making sure that not too many other people start to live there. Liquidity is worth something so it would reduce the price somewhat, but I don't think it's central.

spaetzleesser 5y ago

"If the US returned to a 1950s style tax system or enacted very high wealth taxes this problem could be avoided, but the forces arrayed against you for proposing such reforms would mean political suicide for anyone who does it. " It's also a culture thing. Companies used to accept some level of social responsibility outside of making money. The shareholder value over everything else since the 80s broke social contracts and made it ok for wealthy people to only look after themselves. I think we have to get back to a place where it's shameful for companies to lay off people while making record profits and paying bonuses to execs.

logicchains 5y ago

Current monetary policy is literally a massive transfer of purchasing power from currency holders (poor and middle-class people who keep their savings in cash or low-interest bank accounts) to the first people to spend the money, which is the people and institutions working in the financial system. If I counterfeit a billion dollars and go out and spend it all, I've got more stuff and everyone else is a little bit poorer. If the central bank prints a bunch of money and lends it to its buddies in the finance industry for near-zero interest rates, they get more stuff and everyone else gets a little poorer. Now this argument wouldn't apply if it was possible for the average person to borrow money directly from the central bank at the same near-zero interest rate the banks pay, but that isn't the case.

arcticbull 5y ago
> Now this argument wouldn't apply if it was possible for the average person to borrow money directly from the central bank at the same near-zero interest rate the banks pay, but that isn't the case. Any time you take out a mortgage (at well below inflation by the way) you are obtaining new money "from the printer." The same is true any time you take out a loan. This whole cantillon effect business is trotted out and flogged each time we mention economics on here but as far as I can tell, nobody has ever even attempted to quantify the impact of the cantillon effect. > If I counterfeit a billion dollars and go out and spend it all, I've got more stuff and everyone else is a little bit poorer. If the central bank prints a bunch of money and lends it to its buddies in the finance industry for near-zero interest rates, they get more stuff and everyone else gets a little poorer. This isn't actually true. Japan tripled its M2 money supply since 1990 but both CPI and housing CPI remain dead-ass flat. This model is way too simplistic. Which is why it was thrown out alongside the rest of Austrian economics. Things that seem intuitive aren't always right.
pmastela 5y ago
I believe there’s a name for what you’re describing: the Cantillon Effect. > An 18th century French banker and philosopher named Richard Cantillon noticed an early version of this phenomenon in a book he wrote called ‘An Essay on Economic Theory.’ His basic theory was that who benefits when the state prints a bunch of money is based on the institutional setup of that state. In the 18th century, this meant that the closer you were to the king and the wealthy, the more you benefitted, and the further away you were, the more you were harmed. Money, in other words, is not neutral. This general observation, that money printing has distributional consequences that operate through the price system, is known as the “Cantillon Effect.” [1] 1: https://mattstoller.substack.com/p/the-cantillon-effect-why-wall-street https://mattstoller.substack.com/p/the-cantillon-effect-why-...

ajsnigrutin 5y ago

I live in a former communist country where taxes are still higher than 1950s US were, and our housing system is as fucked as yours. There are two problems... first is, that "back then" you could build (almost) whatever, wherever, and people built stuff, now with NIMBY-ism and regulations, you can't anymore. The second problem (the larger one) is, that what was once a thing you bought, because you needed one, and sold, because you moved somewhere else, is now an investment... noone invests in cars, in pasta, nor in pretty much anything that degrades with time.... somehow the housing market got so bubbled up, that it's worth it to buy a house, and instead of prices going down as it ages, the prices actually go up. Limiting investments or limiting number of houses a person can own, would solve a lot of those problems.

szundi 5y ago

No, Quantitative Easing has this effect: asset prices go up. This itself causes rich (asset owning) people more rich. Until the crash.

lend000 5y ago

As I frequently try to point out, wealth inequality seems to only meaningfully decrease during market corrections, which the Fed is determined to prevent at all costs, despite the side effect of increasing wealth inequality (which could be a feature rather than a bug) [0]. The more the Fed distorts normal market signals, like interest rates, the less efficiently capital is allocated, and so the wealth distribution morphs from one that roughly represents human skill at allocating capital to an extremely top-heavy skewed chart that rewards incumbents. [0] https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134

0x4d464d48 5y ago
"(which could be a feature rather than a bug)" Exactly! Thank you. Simple explanations are usually far more useful than ideological and narrative driven ones.

ChrisLomont 5y ago

>If the US returned to a 1950s style tax system Of if consumers bought 1950 style houses there would be no problem, since they're incredibly cheap. Massive increases in the stuff people want in a house over the past half century have driven prices more than anything. Triple or quadruple the area, expect triple or quadruple the inflation adjusted cost. And that is the majority of the cost increase.