QE only helps the rich!!

Discussion in 'Economics' started by S2007S, Sep 14, 2012.

  1. S2007S


    Doesnt take much to notice that BUBBLE ben bernanke and his QE's have only helped the rich and super wealthy, this article has facts that point to just that.

    It does NOT help the regular working class. BUBBLE ben bernanke thinks lowering interest rates and dropping the the mortgage rates is going to entice people to go out and buy houses and lower their mortgage rates by refinancing. Even if you did refinance and lower your payments from say $2000 a month to $1200 a month all that extra money you think you are saving is going no where but back to rising prices, from energy, to food, to taxes to healthcare, so what are you actually saving, nothing. Releasing more QE3 and soon to be QE4 and QE5 will do absolutely nothing, so keep thinking QE is going to help housing and the unemployed because its not!

    Does Quantitative Easing Mainly Help the Rich?
    CNBC.com | September 14, 2012 | 10:12 AM EDT

    Last month, the Bank of England issued a report that must have made Fed chairman Ben Bernanke squirm.

    It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.

    Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.

    Many said the BOE's easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it."

    The BOE countered that the benefits of easing may have trickled down, and that “without the Bank's asset purchases, most people in the U.K. would have been worse off."

    Still, the paper is instructive for the United States. The latest round of QE announced by Bernanke yesterday has sparked growing controversy about how Fed policy has mainly helped the wealthiest Americans. (Read more: The One Percent Gives Up Ground ... to the Five Percent)

    Economist Anthony Randazzo of the Reason Foundation wrote that QE “is fundamentally a regressive redistribution program that has been boosting wealth for those already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy. It is a primary driver of income inequality.”

    Donald Trump – not usually one for distributional analyses of monetary policy – said on CNBC yesterday that “People like me will benefit from this.”

    The reason is simple. QE drives up the prices of assets, especially financial assets. And most of the financial assets in America are owed by the wealthiest 5 percent of Americans.

    According to Fed data, the top 5 percent own 60 percent of the nation’s individually held financial assets. They own 82 percent of the individually held stocks and more than 90 percent of the individually held bonds.

    By helping to reinflate the stock market in 2009 and 2010, the Fed created a two-speed recovery. The wealthy quickly recovered much of their wealth as stocks doubled in value. But the rest of the country, which depends on houses and jobs for their wealth, remained stuck in recession.

    Put another way, most Americans have most of their wealth tied up in their houses (about 50 percent for most). For the top 5 percent, homes account for only 10 percent of wealth, while financial assets account for between one third and 40 percent.

    By boosting the value of financial assets, Fed has helped the economy of Richistan but not the broader United States.

    Bernanke is obviously aware of this criticism, which is why the latest round of easing is focused on mortgages. But here too, there is a divide between the rich and the rest. Despite lowered rates, banks remain strict on lending, restricting access to credit for most Americans. The wealthy and the asset-rich, however, will now enjoy even lower rates on their credit.

    In other words, while Mark Zuckerberg can get a 1.05 percent mortgage, most American’s can’t.

    Of course, low interest rates also penalize savers, and the wealthy as a group have the largest savings pool in America. If you ask the wealthy today what their biggest investment challenge is, it’s finding low-risk yield when CD’s and Treasurys pay next to nothing. (Read more: Ultra Rich Ready to Return to Stocks)

    But that hardly undoes the advantages of easing. According to Spectrem Group, the wealthy have only about 13 percent of their investible assets in cash, and the rest (more than 85 percent) in stocks, bonds, alternative investments and mutual funds - all of which have benefited from easing.

    I'm not taking a position on whether the Fed should ease or not. The benefits for the broader economy may indeed outweigh the costs. And no one else in Washington seems to be doing much in the way of policy to help the unemployed these days.

    The question, though, is whether putting more profits into the hands of the top 5 percent will really generate jobs for the rest of America. So far, the evidence is not promising.
  2. That is the effect of QE in the UK because of how they did it. It would be different depending on who receives the money. If the rich do not get it it will make them poorer.
  3. Lowering rates helps the rich get lower cost financing on their borrowings.

    Raising rates helps the rich get a higher yield on their income producing assets.

    Maybe the Fed should do nothing at all... wait, that can't happen.... gotta do SOMETHING, even if it's wrong.

    The only way to help the non-rich is for government policies to change to favor employing Americans... wait, that ain't gonna happen either...
  4. Personally I think the rich are about to lose everything anyway so it doesn't matter.
  5. Brass


    Gotta post SOMETHING, even if it's wrong.
  6. By that argument, "QE HARMS the rich".

    I happen to agree with you.

    The poor will still be poor.

    What's left of the middle class will become poor.

    The sort-of-rich will become poor or almost poor.

    The very rich will become barely rich or worse.

    I just hope it takes 40 years. By then I'll either be dead or have Alzheimer's and won't know "come here from sick 'em".
  7. Go back to stalking Marketsurfer, faghag.
  8. QE = Fake currency circulated by Fed
  9. I'm not rich and I am pretty happy with my 3.95 APR.
  10. clacy


    It's just another form of trickle down. If you think about it, wealth creation has to be trickle down in one form or another because poor people have nothing to contribute except missery.

    You can either pull poor people up through a healthy economy or you can drag rich people down, but you can never really drive the economy by only shoveling money to poor people who will just figure out how to hand it over to the rich anyway.
    #10     Sep 22, 2012