Trickle down
Posted: October 19th, 2018, 4:21 pm
"The purpose of QE, as Bernanke himself explained it in a Washington Post editorial in 2010, is to create the wealth effect, to bring asset prices up so that the wealthy feel wealthier and spend more money and then this somehow trickles down. So this was an explicit central bank policy that other central banks, especially the ECB and the Bank of Japan, imitated". (quote: Wolf Street)
My take
Trickle down only works as intended when those down have pro-rata means. When they don’t but want to replicate the only alternative is to trigger the law of unintended consequences.
For example, a person wealthy to begin with can borrow on the strength of existing security to buy more tangle assets and become wealthier. A poor person without any security can also borrow but the lack of existing security restricts what can be bought. Instead, the poor person buys experiences which are in effect intangible and addictive. Unable to kick the habit, the intrinsically poor person takes it out on him/her-self generally by comfort over-eating.
Obesity is a way of telling us that society having become greedy is now addicted to greed. To wanting more and more. No wonder so many people are fed up; envious of the wealthy, the masses are up in arms but not having the courage of their convictions they take to social media complaining in the hope that someone somewhere will take pity and do something about it for them. So that instead of taking personal responsibility and doing something about it for themselves they can shift the blame whilst continuing to scoff another bag of crisps.
No wonder the wealthy do not have any time for the poor and needy – it’s just not worth it.
But there is a solution to the mis-match which is beginning to work. When the poor stop buying and reduce spending, instead re-prioritise, the sellers suffer. Which is precisely what is happened to a multitude of retailers and ilk.
Trickle down works both ways. Trickle up.
My take
Trickle down only works as intended when those down have pro-rata means. When they don’t but want to replicate the only alternative is to trigger the law of unintended consequences.
For example, a person wealthy to begin with can borrow on the strength of existing security to buy more tangle assets and become wealthier. A poor person without any security can also borrow but the lack of existing security restricts what can be bought. Instead, the poor person buys experiences which are in effect intangible and addictive. Unable to kick the habit, the intrinsically poor person takes it out on him/her-self generally by comfort over-eating.
Obesity is a way of telling us that society having become greedy is now addicted to greed. To wanting more and more. No wonder so many people are fed up; envious of the wealthy, the masses are up in arms but not having the courage of their convictions they take to social media complaining in the hope that someone somewhere will take pity and do something about it for them. So that instead of taking personal responsibility and doing something about it for themselves they can shift the blame whilst continuing to scoff another bag of crisps.
No wonder the wealthy do not have any time for the poor and needy – it’s just not worth it.
But there is a solution to the mis-match which is beginning to work. When the poor stop buying and reduce spending, instead re-prioritise, the sellers suffer. Which is precisely what is happened to a multitude of retailers and ilk.
Trickle down works both ways. Trickle up.