What does that mean? Are you referring to the inflation-adjusted interest rates? I'm sort of following but make it explicit for me. The 25% bonus the rich got was from... the Fed buying their toxic assets through QE? Or through $12 trillion in liquidity saving the financial system? As for inflation-prone sectors, I've always been confused by healthcare. While healthcare seems to be an atypical good (people would theoretically pay or take on any amount of debt for good health, so the rise in prices seems natural), I don't see how the insane amount of administrative bloat and regulation naturally follows. _____________________ Also, what do you think about interest on reserves? In an economics class in Korea, I'm being taught that it's a wonderful innovation which gives policymakers another instrument through which to affect interest rates. To my mind, it seems like the banking industry just got a permanent subsidy that no one on Main Street asked for, let alone the fact that we don't know the long term effects of paying interest on reserves are. Doesn't it reduce the efficacy of open market operations? What if we keep having to raise the interest-on-reserves to incentivize banks to not lend out that money since it would create inflation? Ben Bernanke is pretty proud of himself, what with creating a new dimension of central bank influence. (something like half the money in the world is currently under negative interest rates, something not seen in the history of banking)
That thing Bernanke and posse did? They basically made it so that if you were a member of the investment class, you got a 25% bonus on your money so you'd keep spending it.
"Negative interest rates" means banks charge you to hold onto your money. Suppose you want to borrow money to buy a car. The bank is going to charge you interest. The higher the interest rates, the more it will cost you to buy a car. Now suppose the government wants you to borrow money to buy a car. The bank will still make money charging you lower interest if money is cheaper for the bank to borrow. QE basically meant that businesses and investors had a powerful incentive to borrow money to spend on stocks, equities and capital improvements because the Fed said "we got money at lo lo lo rates!" They did not do this for you, me, or anyone who isn't publicly traded. That's because it's cartelized and because there's a middle-man extracting profits . First off, you aren't going to shop around for health care. You can shop around for insurance, but unless you're a voracious consumer of health care your knowledge of the market is imperfect. Second off, the fact that insurance companies have to maximize profits by keeping as much as they can and paying out as little as they can creates an adversarial relationship between healthcare providers and insurance providers. Example: Rhogam. We have to give it under state law. It costs us $108 a shot to buy. One of our insurance companies pays us $6 for the shot. So that's a $102 loss we're compelled by law to eat. And since we're in this for profit (also known as "a living"), we will absolutely scattershot every possible category of ICD10 code we can come up with so that (A) we can recoup our $102 Rhogam shot (B) we can pay for the rest of our overhead (C) we can take a little money home. We can't negotiate that $6. We can either take that insurance or not. You as the consumer have no ability to control whether we take your insurance and you have no ability to control what your insurance pays us. You're along for the ride. As far as reserve interest rates, sounds lovely. Most of the developed world runs deep deficits. Korea's debt to GDP is 38%; the US is like 112% right now.
I'm sort of following but make it explicit for me. The 25% bonus the rich got was from... the Fed buying their toxic assets through QE? Or through $12 trillion in liquidity saving the financial system?
As for inflation-prone sectors, I've always been confused by healthcare.
That's the nakedly unfair part. When the central bank greases the wheels of the economy, it helps out by purchasing financial assets, the owners of which are almost de facto rich people. My internet sarcasm is tingling. Sounds lovely? I know that government budgeting is unlike a household's, but I just don't know enough to evaluate interests-on-reserves and feel patronized when economists say Now, Now, It's A Good Thing.QE basically meant that businesses and investors had a powerful incentive to borrow money to spend on stocks, equities and capital improvements because the Fed said "we got money at lo lo lo rates!" They did not do this for you, me, or anyone who isn't publicly traded.
As far as reserve interest rates, sounds lovely. Most of the developed world runs deep deficits. Korea's debt to GDP is 38%; the US is like 112% right now.
Here's the tricky thing about characterizing economics as "unfair" - "fairness" is not a key characteristic of capitalism. From a sociological standpoint you can absolutely advance fairness as a crucial component of society but outside of command economies, "supply & demand" depends on "winners & losers". I wasn't actually being sarcastic. I'm not at all up on Korean economics. I know two things: 1) Korea went from "that shithole you see on MASH reruns" to "that crazy metropolis you see in Psy videos" by going yo dog we herd u leik fascism for just long enough to pull themselves out of the third world at which point they pivoted hard to a market economy. So hard, in fact, that they were held up as "the next Japan" until they had labor riots and an uprising and went pop we're a democracy now. I think if you asked the average American which is older, Die Hard or "Korean Democracy" they'd probably pick the government. 2) One of my favorite "everything you know about economics is wrong" books is by a Korean economist. In fact, I would not turn down any suggestions you get as far as English-language books about Korean history, particularly modern (say 1900-on) Korean history. I would love to find an Asian version of Destiny Disrupted.