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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 m

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
        Rent is a payment to borrow property. Property = Capital.
      - pydry 5y ago
        My parents were similarly middle class. They bought an enormous asset on credit and spent ~4x its purchase value on interest payments. This was pretty normal back when interest rates were high.
      - nemothekid 5y ago
        Buying a house is usually done with a mortgage which is also borrowing money
- nine_zeros 5y ago
  Had monetary policy not made borrowing cheap, the wealthy would have lost wealth too. To the point where economic activity would stop completely and we'd be in a great depression. Monetary policy was necessary. Only lower interest rates for the poor, not for the wealthy or for institutions with assets.
namlem 5y ago
Wealth inequality is coming from land rents. Henry George was right all along. We should have listened.
- rcpt 5y ago
  You're right. It's not too late
- hackerfromthefu 5y ago
  Its coming from the financialization of every aspect of life. This includes tech exploitation of 'users' who can't kick the tech habits from their life because they are designed to be addictive or essential.
arcticbull 5y ago
I'm sorry it's simply not what's happening in housing. For a place that prides itself on logic and deductive reasoning, there's a whole ton of tinfoil hat economics around here. Let's introduce some facts. 1. The inflation-adjusted cost in $/square-foot of a house in the United States remains unchanged from the 1970s according to BLS data. Wages kept pace with inflation (but not productivity). Okay, so why are houses more expensive then? [1] 2. New homes have on average twice the square footage that they did in the 1970s and this is particularly felt outside of urban areas. This is due to zoning rules, setback rules, minimum size rules, etc. 3. Since the 1970s, major metros have significantly restricted new development. San Francisco built less than half the homes needed to sustain the increase in demand over the same period. [3] This is managed through punitive zoning rules and obstinate city councils. Houses in places people want to be became way more expensive because supply was not allowed to grow to meet demand. Houses outside of these urban areas are now twice as big. Housing is expensive because Americans believe housing should be an investment first - and the goal of an investment is to become less affordable over time. You cannot have something be both a good investment and affordable. You must pick a lane. We know it's not what's happening in housing because Japan has basically the same monetary policy, and the same low interest rates - and has tripled their M2 money supply since 1990. But their CPI and their cost of housing remain dead-ass flat for thirty years. Because they have federal zoning rules that allow supply to meet demand. Look at this graph. [2] Your cause is noble but you're pointed in the wrong direction, Quixote. > We are watching the looting of the american citizen in real time, communism/collectivism is once again the wolf in sheeps clothing. We in this case is not the Fed (properly capitalized this way btw) it's city councils. And that's not communism, if anything it's feudalism. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa... [2] https://fred.stlouisfed.org/series/JPNCPIHOUQINMEI https://fred.stlouisfed.org/series/JPNCPIHOUQINMEI [3] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage https://en.wikipedia.org/wiki/San_Francisco_housing_shortage
- peteradio 5y ago
  USA M2 graph is on pace to double in 5 years, that's quite a bit different than the 30 year comparison you make with Japan. Real estate happens on the margins, very few people are selling homes as a percent of homes owned. When I look at Japan's chart there are effectively zero inflection points after 1990.
wolverine876 5y ago
Do you have some evidence to support that causal relationship? Wealth inequality has been growing since long before current monetary policy in ~2008/2009. And I don't know that low interest rates generally create inequality - everyone borrows, not just wealthy people. > 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. People understand that very well: it's the fundamental reason for lowering interest rates, to encourage economic activity. Sometimes you need more economic activity, sometimes you need less.

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
      Rent is a payment to borrow property. Property = Capital.
    - pydry 5y ago
      My parents were similarly middle class. They bought an enormous asset on credit and spent ~4x its purchase value on interest payments. This was pretty normal back when interest rates were high.
    - nemothekid 5y ago
      Buying a house is usually done with a mortgage which is also borrowing money
nine_zeros 5y ago
Had monetary policy not made borrowing cheap, the wealthy would have lost wealth too. To the point where economic activity would stop completely and we'd be in a great depression. Monetary policy was necessary. Only lower interest rates for the poor, not for the wealthy or for institutions with assets.

namlem 5y ago

Wealth inequality is coming from land rents. Henry George was right all along. We should have listened.

rcpt 5y ago
You're right. It's not too late
hackerfromthefu 5y ago
Its coming from the financialization of every aspect of life. This includes tech exploitation of 'users' who can't kick the tech habits from their life because they are designed to be addictive or essential.

arcticbull 5y ago

I'm sorry it's simply not what's happening in housing. For a place that prides itself on logic and deductive reasoning, there's a whole ton of tinfoil hat economics around here. Let's introduce some facts. 1. The inflation-adjusted cost in $/square-foot of a house in the United States remains unchanged from the 1970s according to BLS data. Wages kept pace with inflation (but not productivity). Okay, so why are houses more expensive then? [1] 2. New homes have on average twice the square footage that they did in the 1970s and this is particularly felt outside of urban areas. This is due to zoning rules, setback rules, minimum size rules, etc. 3. Since the 1970s, major metros have significantly restricted new development. San Francisco built less than half the homes needed to sustain the increase in demand over the same period. [3] This is managed through punitive zoning rules and obstinate city councils. Houses in places people want to be became way more expensive because supply was not allowed to grow to meet demand. Houses outside of these urban areas are now twice as big. Housing is expensive because Americans believe housing should be an investment first - and the goal of an investment is to become less affordable over time. You cannot have something be both a good investment and affordable. You must pick a lane. We know it's not what's happening in housing because Japan has basically the same monetary policy, and the same low interest rates - and has tripled their M2 money supply since 1990. But their CPI and their cost of housing remain dead-ass flat for thirty years. Because they have federal zoning rules that allow supply to meet demand. Look at this graph. [2] Your cause is noble but you're pointed in the wrong direction, Quixote. > We are watching the looting of the american citizen in real time, communism/collectivism is once again the wolf in sheeps clothing. We in this case is not the Fed (properly capitalized this way btw) it's city councils. And that's not communism, if anything it's feudalism. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa... [2] https://fred.stlouisfed.org/series/JPNCPIHOUQINMEI https://fred.stlouisfed.org/series/JPNCPIHOUQINMEI [3] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage https://en.wikipedia.org/wiki/San_Francisco_housing_shortage

peteradio 5y ago
USA M2 graph is on pace to double in 5 years, that's quite a bit different than the 30 year comparison you make with Japan. Real estate happens on the margins, very few people are selling homes as a percent of homes owned. When I look at Japan's chart there are effectively zero inflection points after 1990.

wolverine876 5y ago

Do you have some evidence to support that causal relationship? Wealth inequality has been growing since long before current monetary policy in ~2008/2009. And I don't know that low interest rates generally create inequality - everyone borrows, not just wealthy people. > 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. People understand that very well: it's the fundamental reason for lowering interest rates, to encourage economic activity. Sometimes you need more economic activity, sometimes you need less.