April 27, 2021

There is a group of persons, usually conservatives but not always, who promote a line of logic that is rationalistic and not correct in attacking the Fed (Federal Reserve), which looks after monetary policy. They keep saying that the Fed is wrong in keeping interest rates low and buying up government debt.

One of the lines of logic is that the low interest rates being promoted by the Fed is bad for the small people because of their inability to collect significant interests on savings accounts. The rationalizers then build that logic into the claim that the rich get richer and the poor get poorer as a result.

Two major corrections are these: The Fed is doing no more than keeping the economy problem free. It is other forces that create the unequal distribution of wealth. Secondly, interest on savings accounts can never be relevant. Such interest is always going to be low compared to inflation. It can't be compared to ballooning stock prices as a source of wealth.

The real significance of that line of logic is that it creates an inaccurate explanation for the unequal distribution of wealth. Neither interest rates nor Fed activity are the slightest relevance to the unequal distribution of wealth.

Therefore, there needs to be a clarification on the real cause of unequal distribution of wealth. Purchasing by consumers sends wealth upward. Some of the wealth is supposed to be sent downward as payment for labor. Now days, the purchasing sends a lot more money upward than gets sent downward as labor.
 

 
Picking apart that dynamic is needed. Products are more expensive than they need to be. That unnecessary expense sends more money upward as excessive wealth. Products automatically get easier to produce all the time. The reasons are many. One, manufacturing always gets more efficient due to engineering, experience, automation and aggregation including enlargement of companies and absorption of competition.

But very little of that savings is passed onto consumers. Instead it goes into the excess wealth of the top controllers, while less and less of a portion goes back down as labor costs.

A major gimmick that moves in that direction is "mergers and acquisitions." It means one company buying up another company. When that happens, one person or group walks away with that much cash, while consumers rebuy the company. It's a mechanism for justifying products being expensive instead of being as cheap as they should be.

Since business administrators couldn't miss that fact, they do a lot of buying up of other companies—way more than is necessary. The resulting cash bonanza flows through the upper classes in all directions. It first goes through the stock market as a redistribution mechanism.

The stock market is not a constructive thing. Besides redistributing wealth at the top of society, it is driven by nothing but gambling motives. Gambling by nature redistributes wealth while sucking in a few losers. There used to be a concept of purchasing a product called stocks. That concept disappeared decades ago. There is no real product being purchased with stocks anymore. The dynamic is shown by so-called cryptocurrencies, which replace the stock market as a gambling casino for lower class persons.

Now days the price of stocks is determined by gamblers betting against each other rather than an intrinsic value as shown by worthless junk going off the graphs when publicity is focused on it and by cryptocurrencies which have no intrinsic value.

Neither the Fed nor the stock market are shifting economic wealth upward. Only the purchase of products and lack of payment for wages create the upward movement of wealth.