This was a very interesting article. I'll politely disagree with a few key points. I believe these points were critical to the thesis, but I must say that I love the picture you created to represent Jerome Powell. Outstanding.
These critiques are not meant to come across as attacking. Just sharing a few observations.
I'm going to assume the wording about the Treasury increasing spending was just a phrasing issue, so I'll skip to the other things.
1. “This caused the beginning of a massive bull market- 70% of the gains for the last 30 years have occurred since the Fed began their massive QE program.”
Well, that was about 15 years ago. So that’s 50% of the time.
Why were gains so much better during that period? Because the measurement starts during a recession (or a depression as you assert, and I think there is a fair case for that). Just about any diversified portfolio will perform better coming out of a recession or depression than going into it.
2. The reason the wealthiest 10% of Americans own 89% of all U.S. stocks is not because interest rates are low. This is simply R > G. When the rate of return on assets is greater than the growth rate of the economy, we see wealth trend towards being more concentrated. There was a pretty huge book about this a few year back. Made some people very mad.
To keep it brief, we've seen wealth compounding because the returns on capital are much higher than the growth rate of the economy.
3. “The median American worker saw his bosses become enormously wealthy, without additional work or effort put in, while his/her wages were stagnant for basically the entire decade.”
The typical “boss” for most workers is just another employee with minimal to zero equity. They didn’t get rich. Their wages stagnated also. The executives got rich. The owners saw wealth compound. But the “boss” that most people see on a day-to-day basis is just another broke employee trying to look like they have it together.
A very interesting article, but I think you picked the culprit before examining the evidence. When the Federal Reserve dropped interest rates to zero, it reduced expenses for people with negative wealth. It drove stock prices much higher, but it drove interest payments down. The vast majority of interest payments go to wealthy individuals, because they are the ones with the capital to make loans and buy bonds.
Today, Jerome Powell has raised rates significantly. His goal was explicitly to break the back of labor. He spoke clearly about trying to reduce worker's bargaining powers so that wages could not keep up with prices. He was interested in breaking inflation by ensuring workers couldn't afford to maintain demand. It isn't a conspiracy. He said it straight into the cameras. The goal was to keep returns on capital higher. It wasn't pushing prices up, it was pushing the payments up. That's why interest rates are soaring.
Socialist security is a terrible system. It was terrible from the start. That's why it is mandatory. If it was optional, most people would opt out. It is essentially a giant Ponzi scheme with the government mandating all workers join the scheme and continue to pay into it. Yes, fertility rates are falling. Young generations are facing record debt levels and extremely weak wages. Many were defrauded by their colleges as they signed up for tens of thousands in debt, sometimes hundreds of thousands, expecting a good job that doesn't exist. Wages suck and they owe multiple years worth of income for debt that in many cases financed a worthless degree.
What do you do? You opt out of reproducing. Kids are a huge financial drain.
There's going to be a reckoning. The labor force is shrinking, but the number of people is not. It's real simple math. Fewer people working and more people eating means less to go around.
You're right about the situation facing young people, but the Federal Reserve's involvement is jacking up rates today to weaken employees.
Reposting as I think I forgot to use to "share a note".
This was a very interesting article. I'll politely disagree with a few key points. I believe these points were critical to the thesis, but I must say that I love the picture you created to represent Jerome Powell. Outstanding.
These critiques are not meant to come across as attacking. Just sharing a few observations.
I'm going to assume the wording about the Treasury increasing spending was just a phrasing issue, so I'll skip to the other things.
1. “This caused the beginning of a massive bull market- 70% of the gains for the last 30 years have occurred since the Fed began their massive QE program.”
Well, that was about 15 years ago. So that’s 50% of the time.
Why were gains so much better during that period? Because the measurement starts during a recession (or a depression as you assert, and I think there is a fair case for that). Just about any diversified portfolio will perform better coming out of a recession or depression than going into it.
2. The reason the wealthiest 10% of Americans own 89% of all U.S. stocks is not because interest rates are low. This is simply R > G. When the rate of return on assets is greater than the growth rate of the economy, we see wealth trend towards being more concentrated. There was a pretty huge book about this a few year back. Made some people very mad.
To keep it brief, we've seen wealth compounding because the returns on capital are much higher than the growth rate of the economy.
3. “The median American worker saw his bosses become enormously wealthy, without additional work or effort put in, while his/her wages were stagnant for basically the entire decade.”
The typical “boss” for most workers is just another employee with minimal to zero equity. They didn’t get rich. Their wages stagnated also. The executives got rich. The owners saw wealth compound. But the “boss” that most people see on a day-to-day basis is just another broke employee trying to look like they have it together.
A very interesting article, but I think you picked the culprit before examining the evidence. When the Federal Reserve dropped interest rates to zero, it reduced expenses for people with negative wealth. It drove stock prices much higher, but it drove interest payments down. The vast majority of interest payments go to wealthy individuals, because they are the ones with the capital to make loans and buy bonds.
Today, Jerome Powell has raised rates significantly. His goal was explicitly to break the back of labor. He spoke clearly about trying to reduce worker's bargaining powers so that wages could not keep up with prices. He was interested in breaking inflation by ensuring workers couldn't afford to maintain demand. It isn't a conspiracy. He said it straight into the cameras. The goal was to keep returns on capital higher. It wasn't pushing prices up, it was pushing the payments up. That's why interest rates are soaring.
Socialist security is a terrible system. It was terrible from the start. That's why it is mandatory. If it was optional, most people would opt out. It is essentially a giant Ponzi scheme with the government mandating all workers join the scheme and continue to pay into it. Yes, fertility rates are falling. Young generations are facing record debt levels and extremely weak wages. Many were defrauded by their colleges as they signed up for tens of thousands in debt, sometimes hundreds of thousands, expecting a good job that doesn't exist. Wages suck and they owe multiple years worth of income for debt that in many cases financed a worthless degree.
What do you do? You opt out of reproducing. Kids are a huge financial drain.
There's going to be a reckoning. The labor force is shrinking, but the number of people is not. It's real simple math. Fewer people working and more people eating means less to go around.
You're right about the situation facing young people, but the Federal Reserve's involvement is jacking up rates today to weaken employees.
Reposting as I think I forgot to use to "share a note".