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> This is a topic I truly want to become more mainstream knowledge. Wealth inequality only decreases notably during market corrections, which the Fed is determi

> This is a topic I truly want to become more mainstream knowledge. Wealth inequality only decreases notably during market corrections, which the Fed is determined to prevent at all costs [0]. I don't think any action the fed takes can reduce wealth inequality because of the simple reality that there is a capital class, and a class without capital. Once one has capital, they can take any direction of the market in response to any market condition. It "reduces" only in the sense that asset values decline for passive holders, but its hardly a different reality for those with negative/zero/five-figure net worth and the whims of those with 7, 8, 9, 10, 11 figure net worth.

DennisP 4y ago
Sure, some assets do well when others do poorly. But labor is an asset too, and it's possible for labor to come out ahead when everything else is doing badly.
- ThalesX 4y ago
  Capital owners would have to crash through a lot of safety nets to even get to the point where they would consider labor as a possible means to get ahead.
  - DennisP 4y ago
    No, what I mean is that capital owners can do badly while workers increase their income.
  - trgn 4y ago
    I think that's overextending the parent's point. Labor can certainly come out ahead. Market crashed (or at least tech did), and will likely continue to do so. If you're a rentier now, it doesn't mean you'll end up in the poor house, but you're certainly getting clobbered versus the sharp income increases skilled labor is seeing today. I think you'll see this inversion very concretely at the edges; the FIRE-crowd holding on to their jobs for longer would be an example (many of those find them starting from scratch now). Or those evil "capital owners", basically any 60+ white collar employee trying to retire now, they're terrified and will be holding on. Sometimes people get what they want; labor market is completely hot, and capital is down the drain. Seeing very little rejoicing though.
ajsnigrutin 4y ago
I mean.. there are other factors in play too. How much tax does a mom-and-pop (book)store pay, compared to eg. amazon (relative to size, income and profits)? I live in a country that was once communist, and we still get a lot of very left leaning parties (literally with a red star in the logo), who always mention "tax the rich", but the effect of any such measure is, that poor people still pay (almost) zero taxes, rich people earn enough to make it worth it to avoid taxes (open a company in a tax haven country, move money around,...), and the middle class (engineers, developers, etc.) gets fucked. Can't we first fix the tax laws, so that amazon would pay the same effective tax rate as smaller stores do? And then do the same for Bezos personally compared to a regular worker.
- vmception 4y ago
  not really? taxes aren't about getting hurt equally, they are about being a passive revenue source for the country, amongst the other revenue sources. the user experience isn't really a factor and it doesn't make sense to give the overleveraged mismanaged country extra money that is just going to use the taxes to make its interest payments, just so people feel its like they're getting screwed equally. if you spend more than you make that year, then it reduces what you have to pay in taxes. people with savings that far exceed what they earn that year, that they actually spend towards something revenue producing, will not pay taxes on what they earn. if you have outside capital that you spend, and that exceeds your earnings that year, then you have no tax to pay. smaller participants can operate this way too. if they don't have capital and are barely making ends meet by spending what they earn on consumptive things (even if necessary) then they have taxes on what they earn. this is the same for larger organizations if they chose to operate that way. not everyone has access to capital, or savings, or willingness or the risk profile to use their savings towards additional growth. but if you do take the risk, then thats the reward.
  - ajsnigrutin 4y ago
    > if you spend more than you make that year Yes, sure. But if you start another company in eg. cayman islands, then transfer your patents to that company, then that company charges you fees for those patents, and you earn zero on paper in your home country, and a lot in a country with very low taxes, you avoided the taxes in your main country. This is something large companies can afford to avoid paying the same tax rates as smaller ones do, while using the same (or even more) of the infrastructure that is paid by those taxes.
darawk 4y ago
The federal funds rate mechanically lowers asset prices. Wealthy people own assets, poor people do not. Lowering the federal funds rate literally mechanically reduces the portfolio value of people that own capital in relation to people who do not.
- vmception 4y ago
  did you read the just the first sentence? the post acknowledges that the numerical value difference will decrease, while also acknowledging that the reality is barely different at all. so if you really want to say "the distance between wealth is less unequal" then, congratulations? if you looked at "wealth inequality" at the very bottom of an asset crunch or recession, and never even saw what it was at the top of an asset expansion, you would still say "wow wealth inequality is super wide" only to be flabbergasted or amused at how much wider it gets so its kind of a useless distinction if the realities are so widely different either way.
  - darawk 4y ago
    It reduces wealth inequality. That was the original claim, which the comment I was responding to denied.
    - vmception 4y ago
      are you being intentionally obtuse to deflect from how the reality doesn't change, or just pedantic because “if (wealth < prior wealth) return “it reduces wealth inequality”” because the latter is exactly what I’m saying is a bit of a distraction from reality, not that it isnt true Is that a conversation you are willing to have, because we can all do math and just move on to the people that want to acknowledge the relevance of the realities
      - darawk 4y ago
        What is "the reality" to which you are referring? Inequality is measured by relative levels of wealth. When the group with the most wealth's wealth declines relative to the group with the least, inequality declines. Are you trying to make some kind of point that, because it hasn't declined as much as you would like it to, it hasn't declined at all? I really can't tell.

DennisP 4y ago

Sure, some assets do well when others do poorly. But labor is an asset too, and it's possible for labor to come out ahead when everything else is doing badly.

ThalesX 4y ago
Capital owners would have to crash through a lot of safety nets to even get to the point where they would consider labor as a possible means to get ahead.
- DennisP 4y ago
  No, what I mean is that capital owners can do badly while workers increase their income.
- trgn 4y ago
  I think that's overextending the parent's point. Labor can certainly come out ahead. Market crashed (or at least tech did), and will likely continue to do so. If you're a rentier now, it doesn't mean you'll end up in the poor house, but you're certainly getting clobbered versus the sharp income increases skilled labor is seeing today. I think you'll see this inversion very concretely at the edges; the FIRE-crowd holding on to their jobs for longer would be an example (many of those find them starting from scratch now). Or those evil "capital owners", basically any 60+ white collar employee trying to retire now, they're terrified and will be holding on. Sometimes people get what they want; labor market is completely hot, and capital is down the drain. Seeing very little rejoicing though.

ajsnigrutin 4y ago

I mean.. there are other factors in play too. How much tax does a mom-and-pop (book)store pay, compared to eg. amazon (relative to size, income and profits)? I live in a country that was once communist, and we still get a lot of very left leaning parties (literally with a red star in the logo), who always mention "tax the rich", but the effect of any such measure is, that poor people still pay (almost) zero taxes, rich people earn enough to make it worth it to avoid taxes (open a company in a tax haven country, move money around,...), and the middle class (engineers, developers, etc.) gets fucked. Can't we first fix the tax laws, so that amazon would pay the same effective tax rate as smaller stores do? And then do the same for Bezos personally compared to a regular worker.

vmception 4y ago
not really? taxes aren't about getting hurt equally, they are about being a passive revenue source for the country, amongst the other revenue sources. the user experience isn't really a factor and it doesn't make sense to give the overleveraged mismanaged country extra money that is just going to use the taxes to make its interest payments, just so people feel its like they're getting screwed equally. if you spend more than you make that year, then it reduces what you have to pay in taxes. people with savings that far exceed what they earn that year, that they actually spend towards something revenue producing, will not pay taxes on what they earn. if you have outside capital that you spend, and that exceeds your earnings that year, then you have no tax to pay. smaller participants can operate this way too. if they don't have capital and are barely making ends meet by spending what they earn on consumptive things (even if necessary) then they have taxes on what they earn. this is the same for larger organizations if they chose to operate that way. not everyone has access to capital, or savings, or willingness or the risk profile to use their savings towards additional growth. but if you do take the risk, then thats the reward.
- ajsnigrutin 4y ago
  > if you spend more than you make that year Yes, sure. But if you start another company in eg. cayman islands, then transfer your patents to that company, then that company charges you fees for those patents, and you earn zero on paper in your home country, and a lot in a country with very low taxes, you avoided the taxes in your main country. This is something large companies can afford to avoid paying the same tax rates as smaller ones do, while using the same (or even more) of the infrastructure that is paid by those taxes.

darawk 4y ago

The federal funds rate mechanically lowers asset prices. Wealthy people own assets, poor people do not. Lowering the federal funds rate literally mechanically reduces the portfolio value of people that own capital in relation to people who do not.

vmception 4y ago
did you read the just the first sentence? the post acknowledges that the numerical value difference will decrease, while also acknowledging that the reality is barely different at all. so if you really want to say "the distance between wealth is less unequal" then, congratulations? if you looked at "wealth inequality" at the very bottom of an asset crunch or recession, and never even saw what it was at the top of an asset expansion, you would still say "wow wealth inequality is super wide" only to be flabbergasted or amused at how much wider it gets so its kind of a useless distinction if the realities are so widely different either way.
- darawk 4y ago
  It reduces wealth inequality. That was the original claim, which the comment I was responding to denied.
  - vmception 4y ago
    are you being intentionally obtuse to deflect from how the reality doesn't change, or just pedantic because “if (wealth < prior wealth) return “it reduces wealth inequality”” because the latter is exactly what I’m saying is a bit of a distraction from reality, not that it isnt true Is that a conversation you are willing to have, because we can all do math and just move on to the people that want to acknowledge the relevance of the realities
    - darawk 4y ago
      What is "the reality" to which you are referring? Inequality is measured by relative levels of wealth. When the group with the most wealth's wealth declines relative to the group with the least, inequality declines. Are you trying to make some kind of point that, because it hasn't declined as much as you would like it to, it hasn't declined at all? I really can't tell.