[quote=FlyerInHi]CAr, many of the issues you raise are incidental to Fed policy.
The Fed is currently making money lose value when it sits idle. It takes work/labor to place capital to earn a return.
The flip side of that is when money is dear (high interest rates) money itself is an investment.
Concentration of wealth is not something the Federal Reserve can deal with. So blaming the Fed is unfair.
Btw, wealth belongs to pension funds, institutions, wealthy families, pools of savers, etc… The money managers are actually “laborers”. It just turns out that they are more highly compensated than other laborers. Not something the Fed can control.
Back to the original point about tht benefit of saving money. It only works out if there are borrowers who want to pay you interest for it. If everyone stayed out of debt, savings would be worth a lot less.[/quote]
These issues are not incidental to Fed policy; they ARE Fed policy. Note how the Federal Reserve leans toward inflation, rather than deflation — they have an **inflation** target, not a deflation target. Cost/asset price inflation (absent wage inflation) destroys the purchasing power of workers and people on fixed incomes, while increasing the wealth and purchasing power of asset owners. When you read or listen to the Fed governors, you’ll note that the only kind of inflation that really scares them is wage inflation. Inflation favors the rich, while deflation favors the poor. This is neither accidental nor coincidental. The income and wealth gaps shrink during deflationary periods, and that is a good thing.
As for holding cash, the rich hold less cash, as a percentage of wealth/income, than most working people do. The rich own assets. They are the primary beneficiaries of the Federal Reserve’s policies.
There will always be borrowers who want to borrow for productive purposes (like starting or expanding a company), or who need to borrow for unexpected expenses, like medical care, or who want to borrow for more durable assets like houses or cars that can be paid off over time. People should not be encouraged to borrow for everyday consumption nor should they borrow to speculate, but that’s exactly what is being pushed on the gullible public, today.
We need less borrowing and less debt. While that will temporarily slow the economy, it will lead to a more productive, sustainable economy over the long run.
