[quote=ltsdd]
If anything, a depression will widen the wealth gap even more. The richest will still have plenty to eat and still have plenty left to hoard up even more assets on the cheap.[/quote]
It didn’t before in the 1930’s during the great depression. The wealth gap stayed pretty much flat during that period of time. Asset price destruction is the only thing that has meaningfully shrunk the wealth gap in the past 100 years. I’m not saying it’s a good solution and doesn’t come with severe consequences but for those of you advocating that’s the biggest problem with society I’ve offered a solution that is proven to work.
Alternatively you could confiscate assets via some sort of wealth tax, but the only examples of that seem to be in countries that move from capitalism to communism/socialism. I don’t know that a move like that would be any better in terms of economic consequences.
I do know that beating around the edge of the bush with minimum wage increases and financial transaction taxes isn’t going to have a meaningful impact. It might help but probably only in bending he growth curve down a bit. The wealth gap will still be getting larger just at a slower pace. Maybe you could do enough to manage to hold the wealth gap at the current levels, although at some point you may trigger asset price destruction with your policy implementation. Set a financial transaction tax too high and stock market crashes because of it.
Realistically we’re bound to have another asset price crash sometime in the future. Maybe the correct course of action when that happens is to just let it play out on it’s own. Let the bad debt be written off. Let the people that made malinvestments go bust. Don’t have the fed setting interests rate at -5% and buying all kinds of bad debt just to save the bankers millions and billions. I think if you let that scenario play out you’d have decades of strong growth after the pain is over. Unfortunately if you are in your 60’s now and have significant assets to fund your retirement now, a booming economy 10+ years from now after you lost 50% of your wealth, isn’t very appealing.
