The End of an Epoch

The End of an Epoch, by Keith Weiner.

The Left focuses on wealth inequality, because they see one of the signs. The falling interest rate seemingly benefits those who own assets(it does not actually benefit anyone), particularly those who finance assets with dirt-cheap credit. And it harms wage-earners, by incentivizing businesses to borrowcheap to buy capital goods to replace labor.

The Right typically denies this plain fact, because they want to head the Left off at the pass. They want to foreclose on the Left’s policy: which is to impose a wealth tax. Newsflash for the Left: if you think wage earners get a bad deal now, wait ‘til you see what it’s like as you strip-mine the capital from the investors and corporations!It takes capital to pay a wage. …

Consumer price increases:

Inflation makes a weak argument for change. … The one percenters are perfectly happy if consumer prices are rising at 2%, because their assets are rising much faster than that. The wage-earners care only about the relative rate, between how fast their wages are rising and how fast prices are rising. The same for pensioners on a fixed income. And the welfare class cares only that the free food keeps flowing.

People care about rising consumer prices — but not that much. They love to complain, but then they go back to watching the game and drinking their beer.

In our era, we do not have rapidly-rising prices, except in markets that are the most distorted by nonmonetary government interference. Such as health care …

Speculation:

There are two problems with explaining to wealthy people how our monetary system is driving us into the abyss.

One, they are trading, and their portfolios are going up in dollar terms and purchasing power. That is, their “salary” depends on them knowing how to operate within this system, but not on identifying its fatal flaw. They substitute speculation for savings and investment — and the system rewards this behavior.

Two, they resent being told that they are participating in a destructive scheme. They may feel that they are being accused of committing evil. …

Where we draw the line is when people defend speculation as being equivalent to investing, when they normalize it. In investing, one finances new production and one’s profit comes from part of the income earned by that new production. In speculation, one’s profit comes from the next speculator’s capital. They may seem to generate the same outcome, but economically they are opposites.

We understand why people want to see their actions as being good, not just profitable but morally good. In a free market, of course to profit is to do good — there is no other way to profit. We understand why no one wants to hear “sure, you made a buck, but the world is poorer for it.” Or “it’s just a zero-sum game, and your gain is someone else’s loss.”

Leads to a poorer society:

It should be clear why we are nearing the end of an epoch. Prices have been rising for a long time, and could keep rising for an even longer time. But conversion of capital to income, to spend, is like eating the seed corn. That cannot last forever. Sooner or later, you run out. And then real misery begins.

The money system we have suits the ruling class. Asset price increases are wonderful if you own assets, but it prices many —  such as young people — right out of the asset markets, e.g. housing. And here is an awful lot of debt around, which cannot be meaningfully repaid.

What can’t go on forever, won’t:

Evans - debt to gdp ratio, 2015