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Comment by jklein11 | Hacker News Reader

The idea that government intervention is what causes inequality really resonates with me, however, I'm not sure I buy it. In the last 15-20 years inflation has been historically low.

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I'd argue that the reported inflation rate (usually measured by the CPI) doesn't reflect the real cost of living. In the last ten years, rents in my city have doubled. In just the last five years, my average grocery bill has doubled. In just the last year, the average price of a used car has risen over 8%.[1] Meanwhile, the CPI has held remarkably steady at about 2% for 40 years.

According to the CPI, the cost of living has only increased by 20% over the last ten years, which is just not believable.

1: https://www.cargurus.com/Cars/price-trends/

I suspect the recent spike in car prices is due to the pandemic. Over ten years the cost seems pretty much flat (even as cars have become more advanced). Also, cities that are booming will outpace the rest of the country for rent (and therefore grocery) costs. I think you need to look across many cities to get a reliable picture.

Its financial asset inflation, not consumer product inflation.

So is wealth inequality a financial asset issue and not a consumer product issue? Can you elaborate on the distinction?

The government (and/or Fed) creates money. Stocks go up; bread doesn't. If I have to buy bread, I'm not instantly worse off. But if I own stocks, I'm instantly better off.

Why do stocks go up? Because the money gets pumped into financial institutions, and from there into financial instruments.

Why doesn't bread go up? Because the number of people who own large amounts of financial instruments, and who don't already buy as much bread as they want, is zero.

But this situation - they're suddenly magically richer, and I'm not - magnifies existing wealth inequality.

Yes, the government uses money printing to prop up the economy during recessions. The money they print goes into financial assets, inflating them. The rich hold these assets, so they get even richer. This creates massive wealth inequality. So politicians speak out against wealth inequality, then support financial policies that create it. This is why people cannot afford houses.

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