We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

‘“Quantitative Easing is a transfer of wealth from the poor to the rich,” he says, “It floods banks with money, which they use to pay themselves bonuses. The banks have money, and assets, so they can borrow easily. The poor guy, who is unemployed and can’t borrow, is not going to benefit from it.” The QE process pushes asset prices up, he says, which is great for those who own stocks, shares and expensive houses. “But the state is subsidising the rich. It is the top 1 per cent who benefit from Quantitative Easing, not the 99 per cent.”’

- Nassim Taleb, quoted on the Spectator’s Coffee House blog.

18 comments to Samizdata quote of the day

  • PeterT

    Well, it depends. QE could work by handing out the printed money directly to the poor. However, as it works at the moment the money is channeled through the banking system, which is controlled by bankers and others at the top of the ‘money waterfall’.

    I think more insidious than QE is the steady drip of cheap money, which clearly does work as a form of real income distribution from banking ‘outsiders’, which includes all the poor and also anybody who could be considered a ‘price taker’, to insiders.

  • Paul Marks

    Anyone who doubts J.P.s post should go to the Bank of England and ask for their share of the 50 billion of new money (from NOTHING) promised today – see what happens to you.

    PeterT.

    What you say reminds me of Major Douglas (interwar thinker – who pushed “Social Credit”).

    Of course, if new money (from NOTHING) really is a good thing – why should it be dished out (the Lord Keynes way) via the banks?

    Why not give ME some money.

    After all I am poor – and I will spend it……

    “But that is crazy”.

    Yes it is crazy – but so is dishing out the money to the banks.

    Crazy – and corrupt as well.

  • JohnB

    Those who get to spend the manufactured exchange tokens first receive the most benefit, which is mainly those who make up the state and the financial/power establishment.

    They obtain that benefit to the detriment of those who get to spend them last, mainly those who hang onto the exchange tokens as a store of wealth. The savers and the thrifty.

    It transfers money/power to the token issuers, indeed, and destroys individual wealth and thus individual freedom.

    I wonder when they’ll get around to making private wealth (gold?) illegal.

  • Sam Duncan

    I wonder when they’ll get around to making private wealth (gold?) illegal.

    I spotted this this morning, which looks ominous:

    Iran evades US sanctions by paying with gold

    Iran bought 200,000 tons of Australian, and possibly US, wheat last week with gold.

    Oooh, Iran‘s using gold. Gold must be suspect.

    Okay, maybe I’m being paranoid, but it’s not too hard to see the first step towards prohibition being the banning of payment in gold for international trade, in the name of “cracking down” on “sanction busting”.

  • 'Nuke' Gray

    The poor just use money for food and clothing and necessities- they never invest in anything! The rich are the ones with dreams. What’s Wrong with That?

  • Rob H

    I was going to write that:

    “The tax threshold could just be doubled for every person to about £15,000. Therefore only rewarding ALL working people.

    This would massively reduce private houshold debt, and turn the liabilities of the working poor that so many banks worry about into assets (because they will be able to pay off the debt.

    The shortfall in tax revenue could then just be printed a la QE to fill the gap. However, I suspect that the Tax revenue from VAT and corporate profits would rise due to the extra spending in the economy.

    But then it occured to me that I don’t really understand why, if we can just print more money that we can’t just pay off the debt. The savings on the interest payments alone would be close to enough to return to an annual surplus without too much effort.

    I’d be grateful if someone could explain this clearly.

  • PeterT

    Paul, I am happy for my comment to be used as a foil, but I don’t recall saying that I approved of “QE for the poor”. Not of course that this is necessarily implied by your comment, but “for the avoidance of doubt”.

    Rob H – you are forgetting about inflation I think. Your concept would just redistribute real income from creditors to debtors. You might as well put a special tax on savings and use this to pay a negative interest rate on debt.

  • RRS

    A la Rob H on tax threshholds, and private debt.

    I have not seen any detailed studies on the same in the U S, where almost 50% are non-income tax payors, and for the moment somewhat relieved of parts of payroll deductions, but, I don’t think the correlation of private debt (houshold indebtednes) to tax exempt status is very high.

    So, it is not likely that the proposal to change the tax threshhold would impact a corresponding level of private indebtedness.

    An answer with closer correlation (but more distant political prospect) would be to a tax allowance (credit against tax levied) of some portion of private debt repayment; not a deduction for interest charges, rather the reduction of principal previously outstanding from say, 2008.

    That should start another Tea Party movement by those who have kept their affairs in order.

  • nemesis

    Sam Duncan; “Oooh, Iran’s using gold. Gold must be suspect.”

    Zero Hedge seem to think it has more to do with petrodollars. Even more ominous !!!

    http://www.zerohedge.com/news/very-different-take-iran-barters-food-story

  • Alisa

    Not to speak for Sam Duncan, but his point as I took it is not that gold should be suspect because Iran is using it, but because Iran’s using it would be used as an excuse to ban its use by others.

  • nemesis

    Ailsa, sorry, my post badly phrased. Sam makes a valid point. Im merely suggesting that there is possibly another agenda at work – that of petro dollars.

  • Alisa

    Nemesis, is that by any chance the same petrodollars theory that has been suggested in certain circles as “the real reason” for invading Iraq? In any case, I apologize for any misunderstanding.

  • nemesis

    As I understand it from a paragraph in my link:
    “The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar’s value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.”

    Which would understandably make the US very nervous at any attempts to undermine the petro dollar and go to great lengths to protect it. So yes it would seem to follow that would be a reason for the Iraq invasion.

  • Being a (slightly manic) beancounter, I like to look at the numbers. It is claimed that the QE so far has possibly increased GDP by as much as 1% or more. In money terms that is about £15bn – although there is no evidence for this. The level of QE is more than 10 times this. Early Keynesians said the multiplier of injecting money in the economy could be 5 or 10. The QE method would seem to have a multiplier of <0.1.
    Is the pattern of house price inflation confirmation of Taleb’s hypothesis? That is the most valuable houses in London with 10%+ inflation, with falls in the poorer and more distant provinces?

  • Didn’t the US (allegedly) attempt to shoot that commie Chavez for something similar?

  • lucklucky

    “Which would understandably make the US very nervous at any attempts to undermine the petro dollar and go to great lengths to protect it. So yes it would seem to follow that would be a reason for the Iraq invasion.”

    Instead of spouting silliness, answer one question: How many dollars change hands each day in money trade and what is the % of that related to oil?

  • nemesis

    lucklucky: I have no idea. I presume you do.
    Since you are obviously well versed in economics please enlighten me as to what is there to protect the US dollar as the world’s reserve currency?

  • Alisa

    what is there to protect the US dollar as the world’s reserve currency

    As things stand now, nothing at all.