> Wealth inequality is causing many protests recently.

I feel like "wealth inequality" is such a useless frame that it makes me wonder if the politicians harping on it are using it as a dodge to avoid the real issues.

Suppose a middle class lifestyle requires wealth 100 and below 50 is poverty. If the 25th percentile is at 40 and the 99th percentile is at 400, that's very bad, even though it's "only" a factor of 10. If the 25th percentile is at 200 and the 99th percentile is at a million, that's not ideal, but it's certainly better. So the ratio is basically a red herring and what matters is how the people at the bottom are actually doing.

Meanwhile most of the underlying problem with "wealth inequality", both in terms of cause and harm, is actually market consolidation. If you were an early shareholder of a trillion dollar corporation then you're probably a billionaire, but you wouldn't be if trillion dollar corporations didn't exist because there were 100 companies each of 2% the size instead of 2 companies each the size of countries, and moreover the problems come from the existence of a trillion dollar corporation which can then run roughshod over everybody because they don't have enough competition to keep them honest. Which isn't solved in the slightest bit by leaving the corporation the same size but causing it to be owned by mutual funds or foreign investors instead of domestic founders. But people keep proposing taxes as the solution to it, which is exactly the thing that doesn't fix that.

> Young couples can't afford to buy a home to start a family because interest rates are 3x higher than a few years ago while home prices went way up since covid

Current interest rates are in line with historical norms; ZIRP was an aberration. And in general higher interest rates result in lower housing prices, because you don't have people taking out huge low-interest loans and bidding up the prices.

The problem right now is that the transition from ZIRP to normal interest rates sucks, because it creates short-term gridlock. Somebody who would like to sell their house and move can't do it because the payments on a new, higher-interest mortgage are higher than the ones on their old low-interest mortgage, and then they can't afford it so they don't sell their house, which keeps supply off the market.

The best way to fix that is to solve the gridlock with new supply, but we mostly prohibit that through zoning. But it'll happen either way because eventually those low-interest mortgages age out (i.e. get paid down) and then the gridlock breaks and prices come down, it just takes longer and causes more damage in the interim.

And either way the result is going to be a reduction in housing prices, which people are going to call a "housing crash" and complain about it. But the issue isn't prices going down, it's that ZIRP causes a bubble. That's a sunk cost; we're already in it. Returning to ZIRP is only an attempt to re-inflate the bubble, which is just kicking the can down the road. And, of course, you can't use ZIRP if you're trying to fight inflation, which is why causing the bubble to begin with is bad -- once you have enough inflation to make ZIRP untenable, the bubble ultimately has to pop, and trying to fight it (which is what we did in 2008) only makes it worse.

Content warning, this graph is distressing:

https://fred.stlouisfed.org/graph/?g=1Mdsa

The peak in 2007 was the massive housing bubble that crashed the economy.

▲

tempodox 15 hours ago | parent | next [-]

I have to disagree. If those at the top are too perversely rich, it doesn’t matter wether those at the bottom may still be doing well at the moment. Human nature dictates that the rich will concentrate power and use it to dictate terms to everyone else, to pervert justice, and concentrate ever more money and power. Even if those at the bottom were well off before, they won’t be for much longer. Just watch what’s happening in the US. The ratio betwen rich and poor has not gotten smaller over the decades.

	▲	AnthonyMouse 9 hours ago \| parent [-]
		> If those at the top are too perversely rich, it doesn’t matter wether those at the bottom may still be doing well at the moment. Human nature dictates that the rich will concentrate power and use it to dictate terms to everyone else, to pervert justice, and concentrate ever more money and power. This is accurate except that it's missing the most important part: The mechanism by which this operates is large organizations, i.e. megacorps and governments. The power vested in the CEO of a huge conglomerate is independent of their personal wealth. A corporation owned by Wall St rather than the founder is at least as likely to engage in rapatorial behavior. Any proposal not effective to break up the power concentrated in large organizations is a sham. And government spending works the same way. Most of the federal tax dollars collected go to the likes of Lockheed and UnitedHealth and affluent retirees, not the poor or middle class working people. It's actively counterproductive to shovel more money in those directions. It's funding the people who capture the government. Attempting an increase in government revenue when that is where the existing money goes is a plan to make the problem worse. Prove that you can cause the existing money to go somewhere else before you ask for more. People keep proposing to take money from "Elon Musk and Jeff Bezos" because they're an unsympathetic excuse to divert even more public money to Northrop Grumman and the AARP, and then in the actual bill most of the money comes from doctors and engineers making six figures rather than ten. But the thing it actually needs is to have less public money going to cronies and more aggressive antitrust.

▲

ch4s3 a day ago | parent | prev | next [-]

I should print this out and frame it. This is basically my exact thinking on the issue. We really need to think about the tangible goods and services that make for a quality life for the bottom to middle quintiles and figure out how to produce way more of that stuff.

▲

yifanl a day ago | parent | prev | next [-]

This is failing to consider that 100 wealth doesn't have the same buying power over time, and continuing wealth inequality necessarily means that someone who's comfortable today will be uncomfortable tomorrow.

	▲	AnthonyMouse a day ago \| parent [-]
		None of that is correct. If the market cap of Google is a million dollars and a sandwich is $5 and then tomorrow the market cap of Google is a trillion dollars because they wiped out all their competitors and took over the market, the price of a sandwich is still $5 because it's quite unrelated and not affected by the number of search engines or mobile operating systems. Larry Page isn't going to personally eat so many sandwiches that it affects the global price of sandwiches no matter how much money he has. Moreover, necessities generally have elastic supply -- even if demand increased, we could just make more of them rather than raising the price -- unless you cause artificial scarcity (as we do with housing), in which case that's your problem independent of billionaires. What the consolidated market does affect is that market, e.g. the price and quality of phones and phone apps. But that has nothing to do with what proportion of the company's shares is owned by what number of people. It's just as much of a problem if it's a publicly-traded company whose largest shareholder owns less than 1% of it. And the problem goes away if the market is competitive even if there exists someone who has billions of dollars as a result of owning a fractional percentage of a million different companies -- although that usually isn't what happens anyway because the primary driver of the existence of billionaires is "market consolidates enough to cause one company's market cap to exceed a hundred billion dollars", not "someone invests a thousand dollars each into a thousand separate companies and every one of them beat the market by a huge factor without any of them becoming a megacorp".

▲

dr_dshiv a day ago | parent | prev [-]

Isn’t AI a deflationary force? Like, a unit of intelligence is getting cheaper over time?

Also, migration & outsourcing…

	▲	AnthonyMouse a day ago \| parent [-]
		Companies are mostly doing layoffs because interest rates went up and using AI hype as cover. The anti-inflationary force is the higher interest rates. And if AI was actually lowering the cost of that sort of thing then you still have to contend with the Jevons paradox. Meanwhile the hype is causing things to be converted to "AI" even when it isn't any more efficient, which lowers labor demand (suppresses wages / increases unemployment, bad) and increases power demand (higher electricity prices, bad) and to the extent that hype causes adoption of inferior solutions, lowers efficiency (worthless AI customer service, bad). Some of the AI stuff is useful but the hype is causing folly. Migration isn't particularly deflationary, especially with respect to housing prices since the new residents then increase housing demand, which is fine when construction isn't constrained by zoning but bad when it is, and right now, it is. Most of the outsourcing that can reasonably happen already has, in large part because the US housing market (and therefore cost of living) has been out of whack for a long time, which makes US workers less competitive despite what would otherwise be various countervailing advantages. Things are made in China because they fit on a container ship, but that happened decades ago. Nurses and landscapers and firefighters and plumbers are still domestic and that isn't likely to change.