COVID wealth redistribution

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J_
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Re: COVID wealth redistribution

Post by J_ »

@Augustus: long time redistribution of wealth has been a process of about 80 years in Scandinavian and some other European countries like the Netherlands and in a lesser mode Germany, Belgium. Just by increasing taxes. It makes people less scary if things like covid happens, and perhaps less angry.

nomadscientist
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Re: COVID wealth redistribution

Post by nomadscientist »

Most people are broke anyway and I guess they stay broke.

Biggest losers are people with all their networth in some types of businesses, like restaurant. These people aren't that numerous or sympathetic.

A big shift to socialism just does not have the underlying current of elite ideology to motivate it the way it once did. There is also a good chance that recovery from here will be almost as rapid as the contraction - do you expect people will just stop going to restaurants and bars after the reopening?
Last edited by nomadscientist on Thu Apr 30, 2020 2:40 pm, edited 1 time in total.

biaggio
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Re: COVID wealth redistribution

Post by biaggio »

@J_ redistribution of wealth in Scandivania does not work as well as one might think. For Sweden: https://marginalrevolution.com/marginal ... weden.html.

nomadscientist
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Re: COVID wealth redistribution

Post by nomadscientist »

If the monetised economy is going to spiral to zero value and productivity then you should buy a farm out West.

nomadscientist
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Re: COVID wealth redistribution

Post by nomadscientist »

I dont understand the connection between the proposed problem (spendable money spiralling to zero) and the proposed solution (confiscating assets to release money for redistribution). Who is going to buy the confiscated assets?

The solution to such a problem, if it is a real problem, is for the government to print cash and give some of it to each person - which it has done. This shouldn't require mega inflation or seizure of safe deposit boxes.

Lucky C
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Re: COVID wealth redistribution

Post by Lucky C »

Low income earners are now earning more by being on unemployment. If business owners need to increase wages to entice these people back to work, then that will get some wage growth at the bottom going.

If wealthy people's net worth (investments) fall 50% while non-wealthy people don't have enough investments for their net worth to fall that much, then even though everyone is hurting, the wealth gap narrows by the wealthy getting poorer at a faster rate than the masses.

nomadscientist
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Re: COVID wealth redistribution

Post by nomadscientist »

Augustus wrote:
Thu Apr 30, 2020 2:52 pm
Okay, you had enough money to buy 10 beers on Monday, The government mints a 20 1 trillion dollar coins, and you have enough money to buy 1 beer on Friday. Again, call it whatever you want to call it, how do you maximize beers on Friday?
The idea is that on Monday I have enough money to buy 1,000 beers, but I don't because I don't want to drink that much, while ten other people have enough money to buy 0 beers. The government mints some coins which mean that on Tuesday I have enough money to buy 900 beers and ten other people have enough money to buy 10 beers each.

In your example, the minted money just vanishes. Sure, if government action destroys 90% of the real value of the economy each year, we are in trouble.

nomadscientist
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Re: COVID wealth redistribution

Post by nomadscientist »

Giving $2,000 to each household does not cause significant inflation, so I just don't think it is going to be an issue. It's a jump start to the economy, not a new mode of economic organisation.

The things that happened in the 1930s were as much a result of intellectuals having wanted to do them for decades and here is an excuse, as a response to those specific circumstances.

jacob
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Re: COVID wealth redistribution

Post by jacob »

The Gini index is cyclical. Here's the longest timeframe a quick google revealed: http://www.the-crises.com/income-inequa ... -the-us-1/ (first graph). It is wise from the perspective of the wealthy to make sure that the index doesn't get too high lest a crisis be using the rewrite the laws of society to bring it down again. However, that's not what happened in the aftermath of the GFC, rather the opposite. QE mostly benefited shareholders and what a boon that was. However, those who haven't been in the stock market haven't done much "winning".

The most digestible equalizer policy after CV19 would be universal health care paid for by taxes. Likely a reversal of the Trump tax cuts and then some---meaning those who benefited substantially will lose substantially. Note that most people saw little difference because it disproportionally affected the six+ figure earners. Unemployment benefits might also be on the table. Especially now that some states are wanting to open pre-peak in order to avoid raising taxes (they can't just print their way out of the problem) as they run down their unemployment budgets. This might not sit too well with those who are given the choice to risk infection or lose their paycheck.

In general, many voters don't believe in paying for such programs until they suddenly need them themselves. This time there are relatively more needing them and this might flip or at least cause a drift in the attitudes. Those at the top of the wealth pyramid will probably prefer a financial haircut rather than risk a real one. Hence the wisdom or making sure the Gini index doesn't swing too wide. If the trend continues, the next step will be gated neighborhoods and shantytowns.

BMF1102
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Re: COVID wealth redistribution

Post by BMF1102 »

Augustus wrote:
Thu Apr 30, 2020 1:42 pm
So when all this is over, and the masses are broke and mad as hell, how are they going to start taking other people's money?
Ban Cash (invisible virus that lives on surfaces for days perfect excuse) negative interest rates.

Will they start inflating the dollar? The Fed has made clear they would do what ever it takes to keeps things on an even keel, just keep tacking zeros on the end of the balance sheet. They are also buying everything in a round about way.

I believe a generous portion of cash set aside, precious metals, a home away from dense population areas and interstates would be helpful and I am beginning to see some possible value in digital currencies, bitcoin etc; stored on a drive at home out of the system. ( do not know much about cryptos) You have to think of all this as insurance though... not an asset.

George the original one
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Re: COVID wealth redistribution

Post by George the original one »

Can't possibly happen before the election because of the current political lock. Overall, America is still not ready for the idea of UBI; far too many of us are wary of UBI for it to be practical. Besides, if we can't even come to a consensus about "fixing" social security, there's no way UBI will become a reality.

jacob
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Re: COVID wealth redistribution

Post by jacob »

Augustus wrote:
Thu Apr 30, 2020 4:26 pm
To make that a bit less abstract, there is already popular political base for career baristas in the form of Sanders and AOC. That crowd has a ready made solution they've been preaching for a while that is gaining popularity right in time for an election, timing is perfect for them.
I have been rather concerned with the rise of the "Socialist Populist [college-educated but underemployed] Students Party" on the left as well as the "Nationalist Populist American Workers Party" on the right. The rise of populism indicates that there are too many who are losing out economically and therefore no longer abide the traditional left-right distraction over petty squabbles that the establishment put in place to domesticate the middle class. The system might turn from left vs right to top vs bottom ... and I don't want to be in the middle of that.

This is not a question of timing. It is very much repeating historical patterns. This has been years in the making but it especially accelerated with QE which benefited shareholders more than anyone else. However, going back, it started with Reagan/Thatcher (neoliberalism) and was briefly hidden by the internet boom, which benefited everybody, but then went sideways again with the dotcom bust and then the GFC. QE didn't help at all.

Heck, it even matches up with the fourth turning with these years constituting the moral crisis. However, it seems that rather than making 2020 about left-populism vs right-populism, the majority still desires a return to the establishment values in that the primaries showed a desire for left-centrist (establisment) candidate to go against the right-populist rather than populist vs populist. The fireworks might not be as spectacular as you fear.

I still think it's wise to lower the Gini index a tad to cut down on the volatility. Try not to think of it as wealth redistribution. It could be as simple as a changed wealth distribution. Maybe those who stock shelves will refuse to work for $8/hr anymore now that the hazard component has been made clear. Ditto other dirty jobs. Correspondingly, maybe some well-paid jobs will pay less now that they've been shown to be inessential. Ditto shares in companies producing doodads. And so on.

jacob
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Re: COVID wealth redistribution

Post by jacob »

The renaissance foundation (ERE chapter 4) means I get roughly 4x as much out each dollar spent as the average consumer. It's probably more since most of my dollars are used to pay head taxes like various insurances, connection fees, real estate taxes, etc. When it comes to actual use-spending (food, tools, parts, ...), I spend very little. (I estimate less than $2000/year). Definitely less than almost all other people. Thus if everybody gets the same UBI, it will likely be scaled so it's more than enough for me. For example, the $1200 stimulus was enough to pay for two months of my expenses. Others blow through that in less than a week.

If wealth is wiped out but replaced with helicopter money, I'd be fine with that, since I mostly use money to pay for mandatory services I'm not overly reliant on anyway. Being resilient against losing my wealth was part of the original strategy.

FAQ: What if you lose all your money?
A: I'll just get a part time min wage job which will more than cover my outlays.

In short, ERE will still do well but in a different way.

white belt
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Re: COVID wealth redistribution

Post by white belt »

Secular inflation or maybe stagflation will be the result of current policies. However, we are still probably 2-3 years out from that since there are so many deflationary factors right now due to the economy shrinking. As is usually the case with inflation, the Fed will not be able to react quickly enough to curtail it.

The personal finance answer is that real assets will perform well like land, commodities, gold, real estate, etc. Cash will of course not do well.

The ERE answer is that personal skills cannot be inflated away (which I think is what Jacob is alluding to). Financial wealth is only one form of capital.

Alphaville
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Re: COVID wealth redistribution

Post by Alphaville »

We see upward wealth redistribution all the time, and nobody makes a peep about it because it’s considered “natural” by social Darwinists. Theft is institutionalized in our society. Take the Wells Fargo account fraud—has anyone even gone to jail for it?



ETA: now we have EPA rule relaxation/elimination being proposed. That means businesses can dump their externalities onto the unsuspecting public. Is that not upward wealth redistribution?

Alphaville
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Re: COVID wealth redistribution

Post by Alphaville »

Or take people who know nothing about public health, forcing workers to choose between illness and bankruptcy, because they will deny unemployment benefits to refuseniks. Is that not upward wealth redistribution?



Show me the masks, the tests, the gloves, the sanitizer and the safety measures.
Last edited by Alphaville on Thu Apr 30, 2020 6:30 pm, edited 1 time in total.

nomadscientist
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Re: COVID wealth redistribution

Post by nomadscientist »

America's problems are not really with distribution but rather organisation. Examples:

1. Most other developed countries spend about the same per capita as American tax-funded healthcare programs alone. The US could have UHC right now with no tax increases if it just reorganised that spending. That's ignoring all the implicit transfers going on with unfunded mandates paid for by the insured; in reality the US has more per capita health transfer spending than any other country.

2. Unemployment benefit appears to de-facto exist in that the government feels the need to distribute negative taxes in crises and to bail out companies (including shareholders) on the grounds that it will reduce future unemployment. If you're going to provide such a guarantee de-facto may as well tell people actually what you're going to do and organise the system to fund it accordingly. Unemployment insurance isnt expensive and could be paid by the beneficiaries (over their lifetimes, not as a lump sum). That means you don't spend $50bn bailing out duff airlines' middle management and shareholders to give $1bn to their low paid workers.

3. College is becoming an extension of high school yet college is much more expensive than high school. Why? Adjuncts are cheaper than unionised high school teachers. The "why" is that colleges are summer camps with only a fraction of the budgets spent on providing education. Impose sumptuary laws on colleges so they have to spend on education only. Fund college from municipal taxes like high school and make people go to college where they live. We may also find this makes college much less interesting to those complaining about its cost the most (the overeducated and underemployed).

---

UBI is a distraction that will not happen or else only if the country is otherwise in terminal decline anyway. It's too expensive for a policy that ends up being an addition to rather than a replacement for conventional welfare, which is mostly going to a small number of mega-consumers not a large number of normal people.

GND is another policy that sounds like it has the tide of history with it at first but will inevitably fail as it challenges every special interest at once. The tide is certainly with slowly ratcheting environmental regulations though.

7Wannabe5
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Re: COVID wealth redistribution

Post by 7Wannabe5 »

There are some major differences in the factor which contribute to current high Gini index vs. the high Gini index in previous eras. The leisure class used to not work, but nowadays in addition to income from capital investments, they are also most often highly compensated wage earners. Inequality has also been greatly magnified in recent decades by assortative mating. Prior to high level of entry of women in work force, the correlation between wealth/income of marital partners was fairly low, but now it has increased dramatically. A final factor is that inheritance tax has been greatly diminished since the early 20th century.

So, in order for socialist top-bottom reform to be successful theses days, it would have to act in opposition to widely held notion of work-ethic meritocracy and the largely feminine prerogative towards preference for assortative mating.

Riggerjack
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Re: COVID wealth redistribution

Post by Riggerjack »

@augustus

Buy productive land. Farm land, timberland, range land. You can lease out the range and farm land, and those are interests who won't be bailed out by the politicians you are concerned about.

Timberland just gets harvested when the crop is ready...

All can have their production contracted out.

But really, Jacob nailed it. Simply not needing the money is the easiest and safest solution. Pay off your mortgage. Prepay your taxes. Prepay some bills.

Sit back, enjoy your time off, and your position of safety and plenty, at a time when plenty of others are enjoying neither. Then help out when and where you can, safely.

There's plenty of potential real downsides ahead. This one is merely financial. If redistribution happens, and some of your money goes away, you have the financial skills nailed down. You'll make more, relatively quickly.

I'm not saying don't worry. I'm asking why worry about money? If this is the problem, you have ready solutions. One cannot buy health, regardless of wealth, and health seems to be the root of the current issues.

Zeran
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Re: COVID wealth redistribution

Post by Zeran »

@augustus

Depends on the country,
"Strong Currency" nations can print extra money with impunity. So these would be America, China, Eurozone, UK, Japan, maybe S.Korea.

Of the rest of countries that are short of cash will have to rely on "haircuts" of savings. Which is taking cash directly from large bank balances over a certain limit.
I think it's unlikely they will take property, since it gets complex. This is a really bad time to have sold a house! I would be converting cash into stocks, land, anything really to avoid getting a haircut. Also having physical cash is another way to avoid getting a haircut through your bank.

I'm assuming you are in the US though. 75% of USD is overseas, so when the printing press runs it has a much lesser effect on American citizens. The dilution of cash will improve the value of scarce assets like stocks, land, art etc. So if you are a rentier, like many of the people on this forum, you'll probably profit from inflation of the currency.

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