patrick.net

Reality says

No it does not, for not just one but two reasons:

No matter how much you try to muddy the waters and distract from the fact that you are 100% incorrect, you continue to look the fool.

Here's the bottom line--in your opinion, when someone buys a house, are they only buying it for the capital appreciation??

If the answer is no (which it is), then it's not speculation.

You are just incapable of logic. The decision to buy vs. rent is not based on the need to have a house to live in, but speculations on future cash flow value and resale value.

114

tatupu70 2014 Apr 22, 3:48am

The decision to buy vs. rent is not based on the need to have a house to live in, but speculations on future cash flow value and resale value.

In some cases, yes. But it's not the only reason. And it's irrelevant to the fact that it's not speculation. Almost nobody buys solely for capital appreciation.

115 Reality 2014 Apr 22, 3:50am

Reality says

The decision to buy vs. rent is not based on the need to have a house to live in, but speculations on future cash flow value and resale value.

In some cases, yes. But it's not the only reason. And it's irrelevant to the fact that it's not speculation. Almost nobody buys solely for capital appreciation.

You are still muddling water by drawing in all sorts of ancillary feelings. We are not talking about getting a house or not, but buying vs. renting (that's the real fundamental issue in a house purchase). That decision is pure speculation on comparing cash flows and comparing residual/resale values. It's just like buying/financing cars vs. leasing cars. It's a numbers games. You can get a car and a house either way. Both renters and owners get to send their kids to the local school, and both get to vote in local elections.

116

Heraclitusstudent 2014 Apr 22, 5:01am

Your argument is that creating more money gets people to supply more pizzas. No it doesn't work that way. When demand exceeds supply then the prices rise. Therefore, if more money is created, thus people go out and shop more (driving up demand) then prices will rise do to inflation (money creation). This actually drives down the people's purchasing power. Is that what you want?

This is a total misunderstanding of how the basic balance between supply and demand actually works.

Prices only increase if the demand CANNOT be met. If you have a fixed amount of something, then yes, increasing the money supply just raises the price. But in most cases this is not the situation.

If the supply CAN rise, then the equilibrium can be done at the same price. If you were producing 100 widgets and now the demand is 120, but you can easily produce 120 and raise your profit by 20%, then you will do that, or your competitor will do it for you and you will lose market share.

Given a large supply of idle labor and a large supply of raw materials, you simply can't explain why extra demand would cause prices to rise. They wouldn't. They would just cause more production. People would just do more of what they are doing.

117

Heraclitusstudent 2014 Apr 22, 5:08am

The very purpose of more money printing is raising price; it is this raising of prices that allegedly brings out more production. There are always bottlenecks at any given time. We live in a world of limits; otherwise there wouldn't be a need for economics.

There are very few bottlenecks when the world just added hundreds of millions of new workers to the global economy and the economy is coming out of a crisis that cut demand massively.

In such a world, the lack of demand is the main obstacle to more economic activity. And if you print money and give it to people to do some work, you don't increase inflation, you increase activity.

118

FortWayne 2014 Apr 22, 5:52am

FortWayne says

lower taxes on middle class

raise them on the wealthy

impose tarriffs on offshoring or evasion partnerships, while provide tax write offs for hiring within US.

these are all policies that will create long recessions or depressions.

How so? Incentivising companies to hire in US and to actually hire, instead of hoarding cash would increase monetary velocity. That would be opposite of "recession and depression".

You'll get recession and depression when middle class gets wiped out and rich end up holding all the money.

Don't forget, nature of capitalism is that all the money ends up at the top. Now you can either tax it away to make it flow, or you can print it away which leads to problems. I prefer the taxation at the top.

119 Reality 2014 Apr 22, 2:12pm

Prices only increase if the demand CANNOT be met. If you have a fixed amount of something, then yes, increasing the money supply just raises the price. But in most cases this is not the situation.

At any given time, the production capacity for almost every thing (of economic value; i.e. not "abundant" like air in most places) is limited. Capacity increase takes time. That's why any commodity has any market value at all. The fact that there is a practically economically infinite amount of iron at the core of the earth does not drive iron price to zero in current market, nor does the practically economically infinite quantity heavy metals and helium in space do to those respective markets.

If the supply CAN rise, then the equilibrium can be done at the same price. If you were producing 100 widgets and now the demand is 120, but you can easily produce 120 and raise your profit by 20%, then you will do that, or your competitor will do it for you and you will lose market share.

It's usually a mistake to presume equilibrium when analyzing a market. In a real equilibrium, no business can make any real profit, so no business would even exist. Businesses exist because of transient arbitrage opportunities. When those opportunities are gone, the businesses often cease to exist. Look at Kodak.

Given a large supply of idle labor and a large supply of raw materials, you simply can't explain why extra demand would cause prices to rise. They wouldn't. They would just cause more production. People would just do more of what they are doing.

Economies enter recessions / depressions because old ways of doing things (turning raw material and labor to various stages of products in existing business models) were found to be unprofitable. Perhaps a sudden shortage of a specific input factor is discovered; perhaps that proverbial equilibrium point is reached and "destructive competition" has scaled to such a level that nobody can make enough profit to service loans that had been taken out on more rosy projections in the old days.

The cure to this problem is not asking people to do more of what they were doing (as that was already found to be unworkable), but finding new ways doing things that can break the logger jam, and reduce the debt burden. That's the difference between Soviet Lada factories turning out in the 1980's more and more cars of 1950's old designs vs. newer and better cars showing up in the relatively free competitive markets.

120 Reality 2014 Apr 22, 2:33pm

Reality says

The very purpose of more money printing is raising price; it is this raising of prices that allegedly brings out more production. There are always bottlenecks at any given time. We live in a world of limits; otherwise there wouldn't be a need for economics.

There are very few bottlenecks when the world just added hundreds of millions of new workers to the global economy and the economy is coming out of a crisis that cut demand massively.

There are bottlenecks everywhere: take for example steel production, do you use that to build more houses or more cars or more bridges or more mining equipment and mines to produce more steel? In what proportions? Millions of new workers would be wasted if the government allocate them to war making on each other, as they historically are prone to do when faced those problems.

In such a world, the lack of demand is the main obstacle to more economic activity. And if you print money and give it to people to do some work, you don't increase inflation, you increase activity.

Do we really think the government bureaucrats are better at telling people what activities to do than the various industries themselves?

Printing money and spend it by the government would not increase real economic activities for at least two reasons:

1. The government boondoggle projects would consume raw material and drive up their prices, which would inhibit private sector businesses that also need those same raw material. The result would be reduction in real productive economic activities.

2. Most modern monetary systems do not actually allow printing of money per se, but having the government borrow the money into existence via sovereign bonds. That debt has to be serviced and paid back with interest. That means higher tax burden on the productive sectors of the economy down the road. We have arrived at that "down the road" now, just like they did in 1937 after a frenzy of money printing in 1934.

121

Heraclitusstudent 2014 Apr 22, 3:04pm

At any given time, the production capacity for almost every thing (of economic value; i.e. not "abundant" like air in most places) is limited.

Yes there is something called capacity utilization which goes down during recession and coming out of a recession there is generally ample capacity which means supply can go up and absorb new demand without inflation.

The above is sufficient to show that new money can in fact create new activity, not just inflation, and consequently that you *can* use for a fiat currency to stimulate the economy, contrary to the beliefs of a number of gold maniacs out there.

I'm not saying this because I agree with economic 'stimulus' as practiced nowadays, but you need to understand where people are coming from.

122 Reality 2014 Apr 22, 3:06pm

How so? Incentivising companies to hire in US and to actually hire, instead of hoarding cash would increase monetary velocity. That would be opposite of "recession and depression".

Protective tariffs would result in retaliation by other countries. That would lead to job destruction in export industries, and break-down in global division of labor.

You'll get recession and depression when middle class gets wiped out and rich end up holding all the money.

That's where both tax-and-spend and print-and-spend end up in. When the government officials are allocating the money, regardless from taxation or printing, the money go to their friends. Government officials are human beings too.

Don't forget, nature of capitalism is that all the money ends up at the top.

That's not correct. Free market capitalism is actually the most diffusive system among all the -ism's / social systems ever tried on this planet. Technological advance and consumer freedom of choice lead to old capital obsolescence and replacement by newly emerging capital. That is quite in contrast to the other systems where slave masters, feudal lords and government bureaucrats force consumers to live with old entrenched capital.

Now you can either tax it away to make it flow, or you can print it away which leads to problems. I prefer the taxation at the top.

Market competition can take down entrenched capital much quicker than taxation can. Warren Buffet gets capital appreciation in the $billions, but is only taxed some $10million or so. His tax rate on wealth accummulation is not 18% but more like 1%. By contrast, the 2008 market crash nearly reduced him to a mere millionaire in less than one year instead of his $60+ Billion net-worth.

123

Heraclitusstudent 2014 Apr 22, 3:16pm

Most modern monetary systems do not actually allow printing of money per se, but having the government borrow the money into existence via sovereign bonds. That debt has to be serviced and paid back with interest. That means higher tax burden on the productive sectors of the economy down the road.

Absolutely not. This is not a debt that has to be paid back.
The fed has always a stock of treasury bonds and just buy new ones when some are paid back. This debt simply cannot be allowed to be paid back: this would destroy the money base. Also the interests are sent back to the treasury.

So, while *accounted* like a debt, it simply does not work like a debt. This is just new money printed in existence.

124

Heraclitusstudent 2014 Apr 22, 3:16pm

That means higher tax burden on the productive sectors of the economy down the road.

Well... new money is spent and earned by the private sector. A large part of the money of the private sector IS just the government debt. The *wealth* that was produced through hard work is in fact just paper offered by the government.

So when you say it is "a burden for the 'productive' sector": this is not the case: in fact it is money given to the private sector and a fraction of it goes back as taxes.

The key point here is that the government spends this money and it is spent over and over and creates nominal GDP (either as real growth or inflation), which means the debt becomes smaller, relative to that GDP.

Again, it's important to understand where people are coming from.

125 Reality 2014 Apr 22, 10:50pm

Yes there is something called capacity utilization which goes down during recession and coming out of a recession there is generally ample capacity which means supply can go up and absorb new demand without inflation.

Low "capacity utilization" is indicative of capital obsolescence and malinvestment, not lack of "animal spirit." Juicing demand would only lead to bigger malinvestment. For example, when monitors and displays technology transition from CRT's to flat panels, capacity utilization rate in the industry was low because the CRT production lines were being gradually retired. Having the government placing a 10million order for displays to juice the capacity utilization rate would only crank out more obsolete CRT's, driving up prices for knobs and buttons, and slow down the industrial transition to new flat panel technology.

The above is sufficient to show that new money can creates new activity, not just inflation, and consequently that you *can* use for a fiat currency to stimulate the economy, contrary to the beliefs of a number of gold maniacs out there.

No, new money does not create new activity, but juice repetitions of old activities, and thereby taking up resources that would have been available to new activities.

I'm not saying this because I agree with economic 'stimulus' as practiced nowadays, but you need to understand where people are coming from.

Whenever the intellectual framework allows such "stimulus" administered by bureaucrats, there is an inevitability to how the economic "stimulus" as practiced nowadays: government bureaucrats are inept at picking winners and losers.

126 Reality 2014 Apr 22, 10:51pm

Reality says

Most modern monetary systems do not actually allow printing of money per se, but having the government borrow the money into existence via sovereign bonds. That debt has to be serviced and paid back with interest. That means higher tax burden on the productive sectors of the economy down the road.

Absolutely not. This is not a debt that has to be paid back.

The fed has always a stock of treasury bonds and just buy new ones when some are paid back. This debt simply cannot be allowed to be paid back: this would destroy the money base. Also the interests are sent back to the treasury.

So, while *accounted* like a debt, it simply does not work like a debt. This is just new money printed in existence.

Only the FED's profit after its own expenses are given back to the Treasury. In other words, the economy now has to carry the burden of the FED operation itself, which involves bailing out mega banks with super well-paid executives as well as gaggles of academics to promote the FED itself.

127 Reality 2014 Apr 22, 11:08pm

Reality says

That means higher tax burden on the productive sectors of the economy down the road.

Well... new money is spent and earned by the private sector. A large part of the money of the private sector IS just the government debt. The *wealth* that was produced through hard work is in fact just paper offered by the government.

So when you say it is "a burden for the 'productive' sector": this is not the case: in fact it is money given to the private sector and a fraction of it goes back as taxes.

Newly printed money is not wealth. It is a new claimant on existing wealth. Government spending via its favorites taking up both material resources and labor is not much different from say dropping a cluster bomb or napalm into the middle of the city taking out the resources and taking out the labor from the productive economy. Cluster bombs and napalm blasts would too create new demand, in the classic broken window fallacy. Government spending in the economy is in fact little different from dropping cluster bombs and napalm blasts on the cities, as far as those resources and people's lives are taken out of the productive economy is concerned . . . and you know what, according to Keynesian GDP analysis, the process of bombing cities into oblivion like during WWII does generate GDP! Is that what we want as individual living human beings? A landscape like Stalingrad or Detroit?

The key point here is that the government spends this money and it is spent over and over and creates nominal GDP (either as real growth or inflation), which means the debt becomes smaller, relative to that GDP.

Debt burden on the economy can be reduced much more efficiently via debt write-downs and defaults. In that process, those who created the bad debts would eat crow instead of forcing the shite storm on everyone else as collateral damage.

Again, it's important to understand where people are coming from.

The fundamental driving force of the Keynesian ideology is the banksters (creators of the bad debts) not wanting to eat crow but prefer passing the mess onto others, and profit from the shite dinner served.

The intellectual con job is carried out via the Equilibrium nonsense "Supply = Demand." It's the economic equivalent of the Zeno Paradox: alleging at any moment (point in time) a flying arrow is stationary, therefore the arrow can never get from point A to point B. The paradox is solved by recognizing that time can not be sliced into points but only segments. Within each infinitisimal segment of time the arrow is still moving (read up an introduction to calculus if you forgot what you learned in college or high school).

Likewise, for a real life ever changing economy, there is no "Equilibrium Supply=Demand" at any moment, only segments of constant transition from one price point to another price point. Within each segment, if Supply is leading Demand, we experience prosperity; whereas if Demand is leading Supply, we experience natural or man-made disaster, and privation.

How can Qualified Supply not equal Qualified Demand at any given moment? Because "qualification" is based on information, and information transmission is not instantaneous. At each and every transaction, the two parties do not have the exact same information. The market place is an information transmission mechanism. Keynesian nonsense presupposes all information being known to all participants. If that were reality, there would not be any profitable trade, and therefore would not be any market.

128 spydah_hh 2014 Apr 22, 11:31pm

OK--let me try this. What is the difference between investing and speculation, in your opinion.

If I bought Walmart Stocks because its the largest retail company in the world, has continually made large profits has a very solid P/E ratio, good balance sheet etc etc. That would be investing.

Now if I bought stocks such as Twitter, worth billions never made a profit in it's 7 or 8 year history and has an outrages P/E ratio and I am betting the stock value would go up because I think they'll SOMEDAY it'll figure out a way to make a profit worth it's P/E ratio. That would be speculating.

129 spydah_hh 2014 Apr 22, 11:35pm

How so? Incentivising companies to hire in US and to actually hire, instead of hoarding cash would increase monetary velocity. That would be opposite of "recession and depression".

And how would you get companies to hire here? I don't disagree with U.S. hiring but explain to me how would you do it?

You'll get recession and depression when middle class gets wiped out and rich end up holding all the money.

You get a depression and serious recession when capital is mis-allocated, or when economic growth slows down (recession) the truth is a recession will always occur at some point of the business cycle because growth will always slow down, economic growth can't always go up and up and up (short term at least).

Don't forget, nature of capitalism is that all the money ends up at the top. Now you can either tax it away to make it flow, or you can print it away which leads to problems. I prefer the taxation at the top.

Income equality always occur, the money flow will never be equal because we're not all equal in skill or even as people, that's just a given. But at least with capitalism those who are at the top won't stay at the top because there is no government to bail them out or assist them. bank of America, Citigrp, and etc are all at the top because the government and the FED continuously favors them they always bail them out and they regulate the industries in their favor, and with all that going on HOW THE F... CAN YOU CALL THAT CAPITALISM? Dude WTF?

130 spydah_hh 2014 Apr 22, 11:36pm

Prices only increase if the demand CANNOT be met. If you have a fixed amount of something, then yes, increasing the money supply just raises the price. But in most cases this is not the situation.

Right, so like I said if there's more demand than supply then prices increase. If there's more supply than demand then prices fall.

131

FortWayne 2014 Apr 23, 1:33am

And how would you get companies to hire here? I don't disagree with U.S. hiring but explain to me how would you do it?

You tax overseas hiring and provide tax incentives for hiring within US. Increase taxes on very high earners to pay off debt.

Income equality always occur, the money flow will never be equal because we're not all equal in skill or even as people, that's just a given.

It's not about income inequality, I never said anything about income inequality. Because income inequality is horse shit subject. Nature of capitalism is monopoly, with one winner and everyone else losing. The only way to keep capitalism flowing is to redistribute what top earners earn to the middle class and the poor so they could go about flowing that money through economy creating prosperity. Incumbency of wealth should not be a government priority like it is now.

132

FortWayne 2014 Apr 23, 1:36am

If I bought Walmart Stocks because its the largest retail company in the world, has continually made large profits has a very solid P/E ratio, good balance sheet etc etc. That would be investing.

Now if I bought stocks such as Twitter, worth billions never made a profit in it's 7 or 8 year history and has an outrages P/E ratio and I am betting the stock value would go up because I think they'll SOMEDAY it'll figure out a way to make a profit worth it's P/E ratio. That would be speculating.

They are both speculation spydah. You are speculating that they'll make more money in the future. One is more speculative than other, but it's still speculation.

When I bought into bank stocks, I was speculating on nothing but the low and high points in the charts. Got lucky and made a killing. Invested in Coca-Cola, very low profit on the other hand, could have made same in a CD account.

133 dublin hillz 2014 Apr 23, 3:46am

It is crucial that they paint a line between investing vs. speculation in order
for people to part with their money. In reality, there is no clear difference
between the speculation vs. investing (which is speculating on asset growth and
returns). People understood that before the invention of 401k corralling
people's money into trust funds for Wall Street banksters, and probably soon
that of the treasury.

There's plenty of research out there that indicates that in the long term stocks beat bonds and cash while bonds beat cash. This is not "brainwashing" by wall st, it is a documented fact. So if someone is in it for 5+ years, then they are not speculating but investing based on historical evidence. What is brainwashing however is the gold cult that is spearheaded by charlatans on AM radio who have convinced their followers that gold is a natural inflation hedge and that inflation will occur based on "government deficits." Talk about "speculation"! They have indeed brainwashed their listener "masses" to "part with their money" and the gold is now 33% below the peak. Many of these people probably went all in to follow the "advice" of their sage idols. If they would have listened to "brainwashers" of wall st and their recommended advice of not having gold be over 5% of their portfolio they would have been in much better shape today. Will they repent and look in the mirror? Probably not.

134 Reality 2014 Apr 23, 4:25am

Were you singing the praises of stocks in the Spring of 2009? how about 2003? What do you think failure to catch those bottoms would do to your average return compared to the index performances (which out-performs the vast majority of managed funds)? Both stocks and commodities run on 30+ year generational cycles. One can easily find 5 year net losses in either asset class. People singing the praises of any asset class is usually a good contrarian indicator. Remember those 2005 magazine cover stories praising real estate? That was a class of assets that never lost value across the nation up to that point, so it was alleged. How did that "investment" turn out in the next few years? Don't you think the people investing in RE at that time were in reality speculating on future RE value?

135 dublin hillz 2014 Apr 23, 6:08am

Don't you think the people investing in RE at that time were in reality
speculating on future RE value?

Yes, they were in fact some of them tried to get the money back that they lost in previous speculation in dot com bust of 2000 when they went all in on companies that had no earnings. Both examples are antithesis of disciplined investing that manifests itself via appropriate asset allocation based on time horizon.

136

MisdemeanorRebel 2014 Apr 23, 6:46am

Well gold prices are being suppressed, but even then the value of gold back when it was $30 back in 1933? Is now over $1200 today. So don't give me short term bullshyt to validate your invalid argument.

And a pound of chicken was 12 cents. Today it's $1.50. Chickens also produce other chickens as well as eggs; gold does not reproduce nor make yummy breakfast or baking ingredients.

To beat inflation, raise chickens. In an Apocalypse, giving a chicken might save your face from being eaten.

Money is just a measurement of value. Like inches or pounds for length or weight.

137 control point 2014 Apr 23, 8:51am

thunderlips11 says

Money is just a measurement of value. Like inches or pounds for length or weight.

Money is a medium of exchange, not a store of value.

138

Bellingham Bill 2014 Apr 23, 1:54pm

control point says

Money is a medium of exchange, not a store of value.

it may not be a store of value, but it is certainly a quantization of it.

139 spydah_hh 2014 Apr 23, 2:04pm

You tax overseas hiring and provide tax incentives for hiring within US. Increase taxes on very high earners to pay off debt.

Yes this won't work. Why? Because of comparative advantage.

Lets take steel for example, which is a by product for a lot of goods. If England was a major exporter of steel and let's say U.S. decided to raise tariffs on all steel imports to protect U.S. steel workers and companies well that can cause a lot of problems.

All the sudden industries who use steel as a by product to their products now find themselves having to raise the prices of their goods, because at one point they were able to buy steel from English companies much cheaper than from the U.S. companies. Since steel is a BIG industry and used in a lot of products this could have a huge impact on the overall economy throwing it into a recession.

So this policy fails to deliever, although it does sound good on paper.

It's not about income inequality, I never said anything about income inequality. Because income inequality is horse shit subject. Nature of capitalism is monopoly, with one winner and everyone else losing. The only way to keep capitalism flowing is to redistribute what top earners earn to the middle class and the poor so they could go about flowing that money through economy creating prosperity. Incumbency of wealth should not be a government priority like it is now.

No capitalism allows everyone to win. When Ford made his cars cheap, what happened? The average person was capable of buying a car now. Of course Ford made Millions became one of the richest men to walk the planet but he increased millions of peoples living standards. He made cars much more affordable. So did Rockerfeller with standard oil, everyone was able to light up their homes, same with Vanderbuilt and his steam boat industry.

See the problem is you're just looking at the wealth of the innovator or entrepreneur, but you're not looking at how well peoples lives were better from their ideas, simply because you are unable to place a monetary value on the result. You see Ford making millions of dollars but don't see the millions of people being able to buy cars enriching their lives, which is unfortunate and why capitalism gets a bad rap from people like you.

140 spydah_hh 2014 Apr 23, 2:08pm

They are both speculation spydah. You are speculating that they'll make more money in the future. One is more speculative than other, but it's still speculation.

When I bought into bank stocks, I was speculating on nothing but the low and high points in the charts. Got lucky and made a killing. Invested in Coca-Cola, very low profit on the other hand, could have made same in a CD account.

If you're going to argue that then your statement about the CD rate is also speculating. You're speculating that the interest rate on the CD will out pace the inflation rate or even interest rates in the future.

But no they're both not speculating. Because speculating is throwing your money into a stock (or betting) with no sound data or reason that you'll get higher returns. Investing is doing your research and looking at the data and determining whether or not that this is a good valuable stock for it current price or even perhaps just loaning money to a company or entrepreneur to expand or start up a company.

141

MisdemeanorRebel 2014 Apr 24, 2:19am

I'm sure many hookers are wives, to their husbands.

1. Never start a land war in Asia.
2. Never go against a Sicilian when lives are on the line.
3. You can't turn a hooker into a housewife.

142

Shaman 2014 Apr 24, 2:23am

thunderlips11 says

Reality says

I'm sure many hookers are wives, to their husbands.

1. Never start a land war in Asia.

2. Never go against a Sicilian when lives are on the line.

3. You can't turn a hooker into a housewife.

#3 also applies to strippers. I'd council every young man in this one. Once they realize sex is for money, that's the way they'll always think about it.

143

smaulgld 2014 Apr 26, 4:30am

The Professor says

lower taxes on middle class

raise them on the wealthy

impose tarriffs on offshoring or evasion partnerships, while provide tax write offs for hiring within US.

Taxes imply that the government is the best place for capital as if they are good stewards of money and spend it in the best interest of those they take it from.

144 mell 2014 Apr 26, 8:33am

Bellingham Bill says

control point says

Money is a medium of exchange, not a store of value.

it may not be a store of value, but it is certainly a quantization of it.

The quantization goes out the door with the fiat system, esp. since central banks started printing like there's no tomorrow. Unless one dollar is backed by one dollar of collateral (doesn't have to be gold) nothing will change, the fiat money is directly responsible for the rising inequality because it is injected at the top.

145

tatupu70 2014 Apr 26, 8:43am

mell says

The quantization goes out the door with the fiat system, esp. since central banks started printing like there's no tomorrow. Unless one dollar is backed by one dollar of collateral (doesn't have to be gold) nothing will change, the fiat money is directly responsible for the rising inequality because it is injected at the top.

Please describe this "injection at the top" process, as you see it.

How is buying bonds or even MBS "injecting at the top"?

146 mell 2014 Apr 26, 8:50am

Please describe this "injection at the top" process, as you see it.

How is buying bonds or even MBS "injecting at the top"?

Buying bonds depresses interest rates, buying MBS leads to loans that would otherwise not be made at that rate and increases demand and prices. Both effects benefit the wealthy (individuals and corporations) most as they have the most leverage (credit) when accessing cheap rates and own the most property.

147

tatupu70 2014 Apr 26, 8:55am

mell says

Buying bonds depresses interest rates, buying MBS leads to loans that would otherwise not be made at that rate and increases demand and prices. Both effects benefit the wealthy (individuals and corporations) most as they have the most leverage (credit) when accessing cheap rates and own the most property.

OK-so they aren't actually "injecting" anything at the top then, right? You're saying they are making it more favorable for people to take loans?

I agree with that, but not your premise that low interest rates affect the rich more than the average Joe. Rich do own the most property, but they generally pay cash.

148

Bellingham Bill 2014 Apr 26, 9:18am