Two things can be true at the same time. Power systems do tend to work for the powerful. But that doesn't mean they can't also be valuable to everybody. Or even valuable to the average person much more than the powerful person.
Look, for example, at food regulation. Anybody who has worked in a restaurant can tell you a) how important food safety is, and b) how much health department regulations contribute to keeping them effective. That's good for almost everybody, but it's most valuable to those who buy food from low-end restaurants, where the incentive to cheat is strongest and where the clientele is low on political power.
It seems pretty hard to me to look at charts of inflation, income inequality, and quantitative easing and compare them to stock market values and not see how the system is allowing the rich and powerful to use inflation to suck money away from everyone not heavily in the market (especially the poor as inflation is a highly regressive tax) and into their own pockets through increases in valuation.
And then look at the barriers that regulation throws against the average person to keep them from the most lucrative investments (like required accreditation) and protecting the people stops feeling like a primary (or even tertiary) goal.
I don't doubt that initial push for regulation was at least in part to protect people from the sharks, but it sure doesn't seem like that's the driving motivation anymore.
> ...the system is allowing the rich and powerful to use inflation to suck money away from everyone not heavily in the market (especially the poor as inflation is a highly regressive tax) and into their own pockets through increases in valuation.
It's not that simple. You're talking like poor people are debt-free and keep jealously-guarded meager savings in cash. However, chances are they have far more debt than assets and no savings whatsoever, so inflation doesn't hurt them (so long as their wages keep up) and may even help them.
I'm not sure if this actually applies to you, but your comment reads a bit like cherry-picking in the name of some ideological fixation (e.g. crypto/gold bug opposition to the idea of inflation. leading to attempts to paint inflation as the worst thing ever).
> look at the barriers that regulation throws against the average person to keep them from the most lucrative investments (like required accreditation)
If anything, the accredited investor standard is proof that regulation doesn't favor the powerful. Taken as a whole, those aren't the most lucrative investments. They're the riskiest. The whole theory behind it is that if somebody is rich enough we won't try to protect them as much from scams; they're presumed to be sufficiently sophisticated and well resourced that it's their own problem.
I agree inflation is a problem, but you can't use that to prove much about the regulatory system, because a) inflation was low and stable for a long time, only increasing due to pandemic-driven disruptions, b) the wealthy are the ones yelling the loudest about pinching off inflation pronto, and c) the classic way to stop an inflationary surge is performative "austerity", which is much more disruptive to the poor than to the rich.
> Taken as a whole, those aren't the most lucrative investments. They're the riskiest.
I'm not an accredited investor but I did mountains of research on it years ago, and most of the time risk does correlate with reward. Also most of the most lucrative investments where people can get really rich are startup investments, which are off limits to most people who aren't already rich. There is definitely a ton of risk in startups, but also so much reward.
I think a better system for protecting people would be education/certification based. If the person truly understands the risk, they shouldn't be stopped by the government from investing IMHO.
I think the reason many of the richest people want inflation to stop is because it forces them into riskier investments in order to stay ahead of inflation. They care a great deal about maintaining wealth and high inflation erases a big class of "safer" investments from their list of options.
Risk correlates with reward, sure. On a very general basis. But there are a ton of specific exceptions to that.
There's plenty of reason to think that opportunities to "get really rich" offered to unsophisticated people without a lot of money will be a big exception.
Just think of it from a startup's point of view. Would you want to take a lot of small checks from people who don't know what they're doing and for whom it's a major portion of their assets? I wouldn't, because it's always a bad idea for people to gamble what they can't afford to lose. I'd feel bad taking their money for something I know has a small chance of success. And just as a practical matter it's low return on effort.
The people who are most eager to take money like that? Idiots, goofs, and fraudsters who cannot get money from serious investors who know better.
Is it? I think a takeaway from Piketty's book was that inflation was one of the rare factors that slowed down or reversed wealth inequality. Intuitively it would make sense that people drowning in debt benefit from (moderate) inflation, especially if low wages get bumped in the process.
Yes that's a great point, as long as debt interest rates are fixed, inflation is good for people in debt. It's especially great for most home owners, but home ownership is largely a middle-class luxury.
But that said a lot of the really bad debt that poor people have is variable rate anyway (and usually outrageous) like credit cards, payday loans, etc.
Re wages: they tend to be sticky. Wages will get bumped up but it's almost always after the fact as a result of government reported inflation rates. So people have been feeling the inflation for a while by the time wages "catch up." And the government inflation rates are notoriously underestimates so in reality wages tend to stagnate and "drop" (they are the same number but buying power has dropped) until market pressures force them to rise.
It would definitely be interesting to hear about past examples where income inequality improved under inflation. In Weimar and Venezuela that doesn't seem to have happened. The poor there end up starving and using leaves for toilet paper. The really wealthy have access to international investing so they're protecting against inflation.
> Yes that's a great point, as long as debt interest rates are fixed, inflation is good for people in debt.
Variable interest rates should be illegal anyway. How can you commit to paying next year a sum that you cannot know? It works somewhat as long as everything is stable, but is a significant fragilisation factor once things go awry. Which they are bound to do, eventually. The answer to that is not to create even more instability in the form of speculative cryptocurrencies; it’s to have better regulations.
> Re wages: they tend to be sticky. Wages will get bumped up but it's almost always after the fact as a result of government reported inflation rates.
Also, wages in real terms haven’t gone up for 40 to 50 years now. Inflation is a tax on savings, so it still penalises the wealthy, but it is not as helpful for the middle class as it once was.
> It would definitely be interesting to hear about past examples where income inequality improved under inflation.
Piketty’s book has a couple of them. The gist of it is that most high inflation events reduce inequality by burning money. People who don’t have any are not burnt. Of course it does not mean that it is pleasant for them, or that the wealthy end up starving. But it does reduce inequality.
A total war is a good example as well, because then the state is going to take the money where it is, i.e. in well stuffed bank accounts, and an existential threat is important enough to make it politically feasible.
And if you think really. The poor who live from hand-to-mouth, do they really care about inflation as long as wages keep going up with it. It is not like they even aim to save anything. So prices going up if also their wages do have really net zero effect for them.
With a steady inflation, the lag does not matter. The current problem is that wages are not following, although inflation had been fairly consistent for a couple of decades (until SARS-CoV 2). Historically, this seems to be an anomaly.
Look, for example, at food regulation. Anybody who has worked in a restaurant can tell you a) how important food safety is, and b) how much health department regulations contribute to keeping them effective. That's good for almost everybody, but it's most valuable to those who buy food from low-end restaurants, where the incentive to cheat is strongest and where the clientele is low on political power.