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Just got back from month long vacation # 3 this year, perspective fully changed: Working for money is fucking stupid. Wow, is it stupid.
I've met dozens of people who travel full time from property and investment income from their grandparents; and I am probably a couple years from fully supporting myself purely from passive income (though I'll probably keep working just to get the number higher; maybe pile up some burnable cash to buy more investment property during the next crash).
The switch was sudden and totally unrelated to anything specific I had done; it is just a result of two generations of skin flint behavior and interest rates. If your family line can get together mid six figures of money in investments and assets and sit on it for 1.5 generations without anyone buying penis compensation trucks or boats or developing a gambling addiction or fentanyl addition; you can just be fucking set. (Said in the tone of a joke, but actually a big ask according to the facts.)
The people talking about class war are 100% right; I can say that for a fact now that I've experienced it from both ends. It's really nice to be on the winning side for once. I just watch the money I float in my checking accounts go up 70k every couple months and most of it goes into investments that will only be dinged if the government of the USA collapses; recission proof and inflation proof and 98% risk free. It is so fucking easy to live solely off the sweat of other peoples brows; no wonder these dudes who were born into it start thinking they can't possibly fail.
All this to say: What the fuck do we do about the fact that owning shit and renting shit is just flat out better in every way than doing shit or making shit?
It's easier, it's safer, it's more sustainable over the course of your life, and you can pass it down to your kids locked away in trust so even the frailest son can't fuck it up.
I know that my solution (radical wealth redistribution, red-black shit at large, etc and so forth) isn't popular here; but even conservatives have got to recognize there is a problem.
How do you solve it without the revolution? Is that question even coherent?
Income inequality goes up over time when there's not a major economic downturn or war. The U.S. has now gone a (nearly unprecedented in history) 75 years without either of those things happening. As you point out, all that's needed to be rich is to invest your money and not be a fuckup for 1.5 generations and let compound returns do the rest.
How to solve it without a revolution? Bring back the business cycle.
We haven't had a recession in 15 fucking years. And interest rates were kept artificially low for 14 of those years. With no substantial downturns, anyone with leveraged investments cashed in. TQQQ (the triple-levered NASDAQ fund) is up nearly 100x since inception in 2010. Speculators won out big time. To prevent inequality from growing too high, we need to flush speculators regularly. People who make bad bets need to lose badly.
High interest rates for a long period of time (a decade at least) would flush the speculators and lower income inequality to tolerable levels. Sadly, I don't think it's possible with the governments debt being what it is.
I see this claim a lot, and it's based on a misunderstanding of what the Fed actually does. If the Fed tries to lower interest rates below the natural rate of interest and hold them there, we get inflation. Now, not after 14 years.
What the Fed actually does is help markets clear faster by targeting the natural rate of interest, i.e. the rate at which the amount of money people want to lend is equal to the amount other people want to borrow. This results in savings being efficiently channeled into investments. If the Fed sets rates too high, there are excess savings that don't get borrowed, causing a recession. If the Fed sets rates too low, it causes inflation.
The fact that inflation was unusually low in the 2010s tells us that the Fed was more or less correctly targeting the natural interest rate, or even a bit above it; the natural interest rate may have actually been negative in the early 2010s.
The huge spike in inflation in 2021 was not the chickens coming come to roost after 14 years of artificially low interest rates. It was the result of a sharp increase in the money supply that made the early rounds of QE look like anthills, combined with excessive stimulus, and pandemic savings burning holes in the pockets of middle-class consumers.
You say rates should be as low as possible without causing inflation. I say they should be as high as possible without causing unemployment. Who's right? The Fed has a lot of room to make decisions based on vibes, not just their dual mandate. Reminder me again why they lowered rates in 2019 into record low unemployment?
But yes, I was oversimplifying and lumping QE/QT in with interest rates.
As long as it is due to a high savings rate and not a low demand for capital, a low interest rate is good because it increases asset prices, making us richer, and makes more potential investments profitable, expanding the capital stock, which increases productivity and the demand for labour, raising incomes.
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