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Comment by chillacy | Hacker News Reader

Every year the GDP grows while inequality gets worse. This is going to come home when most Americans look at the topline stats (GDP and unemployment) getting better while their own lives get worse. Are we optimizing the wrong thing?

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Yes, it's because of central bank policy since '08, which are equivalent to price controls of assets (bonds and mortgages aren't allowed to be too cheap). This directly benefits asset-holders in general and punishes everyone else.

In the past, central banks in this sort of situation might have actually printed money instead. Actual printing of money is good for inequality—it distributes liquidity throughout the economy, encourages inflation, which effectively transfers wealth from current nominal asset-holders to debtors, and depending on how the money gets printed (e.g. use it to pay for a progressive tax credit), it can directly reverse inequality.

Why didn't central banks print money? A main reason is because the way printing money works is it has to happen through well-capitalized banks, which didn't exist in the post-crisis era, and it was hugely politically unpopular to bail them out.

Also, most people don't understand the Rube Goldberg machine of central bank policy and would've opposed money printing or inflation, even if it would've been the key to a real, broad-based economic recovery.

>> most people don't understand

and you sir, most certainly don't understand economics if you believe money printing and inflation are paths to prosperity. go check out venezuela

And you are deeply ignorant of you think that Venezuela which is under industrial and financial assault by the US and Europe is at all germane.

Lol. Venezuela made its own bed, its currency lost 99.99% of its value without any interference from foreign actors. Chavez's open friendship with Castro and harsh criticism of multiple US administrations was his own choice and set up the disastrous Maduro reign. However you interpret the actions in the past few months, it is in response to two decades of failed policies, resulting in unprecedented chaos, unemployment, scarcity and poverty.

>> By November 2015, a multi university study found that about 73% of households and 76% of Venezuelans were living in poverty.[213] https://en.wikipedia.org/wiki/Economic_policy_of_the_Nicol%C...

Would you, or 'smallnamespace,' like to provide counter-examples where high inflation and printing money led to prosperity?

I think your response just proves my point, which is that people have a strong knee-jerk reaction to any level of inflation.

There's quite a difference between a 3-5% level of inflation, which helps smooth shocks in the economy and forces the rich to participate in the real economy to keep the value of their money, vs. hyperinflation, which nobody is advocating for.

>> There's quite a difference...

The difference is between inflation as a by-product of a powerful, growing, economic engine with healthy wage growth (unfortunate but acceptable) and deliberately generating inflation, via money-printing, as the means to stimulate a stagnant economy (pure foolishness).

This is in the context of the Great Recession which saw the largest sudden liquidity withdrawal from our monetary system in recent history. The point of printing money (which I'd like to emphasize did not happen, easily verified by the lack of broad price inflation in the last decade) is to get back closer to your baseline, not to goose an economy already at full employment (that just gets you the 1970s).

> Would you, or 'smallnamespace,' like to provide counter-examples where high inflation and printing money led to prosperity?

Define high inflation. Generally people like you think anything over 2% wage and price inflation[1] will result in utter doom. However the post war period up to the neoliberal revolution had inflation around 5% with peaks over 10%. And yet total growth and prosperity was higher then today. Even the maligned 1970's had significantly faster growth and shared prosperity than post 2000.

[1] I say wage and price inflation because that's all people like you care about. Vs assets inflation which is running at 5-10% for the last ten years. Which is something people who don't believe in cargo cult economics do care about.

You do understand that in your post-ww2 example, inflation was the result of a booming economy, not the cause of it? It's like noticing that most Lamborghini owners are wealthy, and then absurdly buying a Lamborghini expecting to somehow become rich.

The rest of your post, from the "shared prosperity" of the 1970s, to the idea that an infusion of cash would slow asset inflation, to using the pejorative "people like you" (twice) is both insulting and utterly nonsensical.

Venezuela’s economy was cracking even before their “oil crisis” (aka overspending in a non diversify). Even the countries in South America didn’t want to do business with them or be forced to take massive price cuts in order to serve their market under ridiculous top down price controls.

Venezuela created their own mess.

Essentially all of the money created by central banks since 2008 has gone into the hands of speculators to drive up the price of existing assets (paper and real estate). Except for China which built out couple of trillion worth of infrastructure instead.

Their lives aren't getting worse. Income grew last year.

A couple of things need serious addressing: cost of housing (almost entirely due to protectionist zoning laws), cost of education (starting to think boot camps and trade schools aren't such a bad idea after all) and cost of healthcare.

I think there's solutions for those three.

Income growth doesn’t mean equity. It is still getting harder for poor people and easier for rich people.

Housing isn’t just, or even primarily, protectionist zoning laws. Many places really are space constrained, and even going for density doesn’t always reduce costs (many of the densest cities are the most expensive).

As for education and healthcare, these are problems that other developed countries have solved and so are uniquely American.

> many of the densest cities are the most expensive

I don't think the causation runs from dense to expensive. It's desirability that is causing both density and expensiveness.

What do you think has a larger influence on housing prices than protectionist zoning and other regulations that severly restrict supply?

For sake of argument: Might NIMBY sentiment actually be due to insufficient regulations? I'd be a lot more comfortable with someone building near me if I was confident that they weren't going to build some soulless concrete eyesore.

Isn’t this definitionally NIMBY? Might not match modern usage of “all the housing all the time”, but seems in lines with the words as written.

I guess you could get rid of the sentiment by increasing the amount of regulations. But that's not going drive housing prices down.

Adding data to consider: The Gini coefficient is one measure of inequality.

World Bank shows 1980=34.6 and 2016=41.5 for United States.

Maybe this is just perception, but it seems like even if income is going up, quality is going down. Most people cannot own a home with a decent commute in a major city anymore and most of the things we own are mass produced, throw away crap.

That's weird but I think that the quality of the products we own has gone way up in part due to online reviews.

It varies. There is certainly a lot of single-use throwaway stuff. A lot of things that used to be made out of wood or metal are now plastic, and are so inexpensive that it is cheaper to throw away and buy new than to repair stuff. Most furniture now is composites, because they are way cheaper than real wood. You aren't going to hand any of this stuff down to your grandkids.

Other things are much better, though. Automobiles and Electronics are much better than they were 20 years ago.

The inequality in the US is growing but not as fast as you might think from listening to the media: [1]. The real median household income has grown faster since 2010: [2] (the mean household size went from 2.59 to 2.53 during this time [3]) and I think that matters more to an average person than the GDP (as does unemployment like you said).

[1] https://fred.stlouisfed.org/series/SIPOVGINIUSA

[2] https://fred.stlouisfed.org/series/MEHOINUSA672N

[3] https://www2.census.gov/programs-surveys/demo/tables/familie...

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