Hacker News Reader

Comment by esja | Hacker News Reader

It’s not a straw man at all. The Fed explicitly justifies QE and the rest of their monetary insanity on the basis of the “wealth effect”. They believe asset price rises will create a feeling of wealth which will generate additional spending. They know that these asset price prices disproportionately benefit a wealthy minority. This is trickle-down economics.

View on HN

This is your opinion. The Fed never "explicitly" said QE was for "tricke-down".

You are equating the "wealth-effect" with "trickle down" - they are not the same.

The Fed described the wealth effect of stable home prices because people, at the time, were re-financing their homes and taking home-equity loans, which created spending.

Another "wealth-effect" are the stimulus checks. Are you suggesting those too are "trickle down".

The reality is that having more money stimulates spending. Trickle down specifically means only giving the RICH more money (traditionally in the form of tax breaks).

You comment completely conflates these two different notions.

Philosophically it’s the exact same thing.

It is a mathematical certainty that deliberately raising asset prices gives much more money to the rich than to the general public (many of whom get nothing or indeed go backwards by taking on massive debt to keep up).

It’s no different to a massive tax break or any other way of giving wealthy people loads of money in the hope that some of it “trickles down”. And it fails to boost the real economy for the same reason - Bezos can only get so many haircuts, read so many books, eat so many meals.

>The Fed explicitly justifies QE and the rest of their monetary insanity on the basis of the “wealth effect”.

They do?? Do you have a source for this?

They’ve said this publicly many, many times.

It’s quite incredible that the Left have not made the connection between the Fed openly aiming to increase wealth inequality (which is what this is) while also keeping a watchful eye out for any wage inflation (which is the only way the common person can keep up).

https://digitalcommons.trinity.edu/econ_faculty/31/

Search for Bernanke wealth effect or any variation you like. The BIS and other central banks talk about it openly as well.

The central banks are the biggest engines of wealth inequality in the world, and it’s all done in the open with barely any pushback.

Not really. They used this term in the housing crisis, in reference to stabilizing home prices. They recognized that home equity loans were driving a lot of spending AT THAT TIME. It's not some general core principle.

Also, the stimulus checks are also a "wealth effect" mechanism, but no one would confuse that for "trickle down".

The title makes a false comparison.

That’s not the case. All the central banks and the BIS understand and use this terminology when discussing the relationship of asset prices to demand, and it’s not at all specific to the USA or even a specific time period or specific market in the USA.

Also, the stimulus checks are a fiscal measure and have absolutely nothing to do with the wealth effect induced by loose monetary policy.

Reply on news.ycombinator.com