Wednesday, July 27, 2016

Our Distorted Monetary System Favors
The Rich & Hurts the Poor
"Always when new money is produced, there is a redistribution in favor of those who receive the new money and spend it at the old, still low prices and to the detriment of those who receive the new money later and see prices rise faster than their income. In our fiat money system new money can and is produced at almost zero cost. Those actors, who are in position to receive the new money first benefit. Among them are the government and the financial system. The new money is usually introduced into the market in form of loans. Those, who receive a higher percentage of these loans profit at the cost of those who do not. The super rich have an advantage in this respect. They have an easier access to the new money produced by the banking system in form of loans, because they can offer collateral. They can offer real estate as a collateral for new loans using these loans to buy even more real estate or stocks pushing up prices. A poor person has more difficulties to get a loan in normal times because he does not own assets. Only in dangerous bubble times will he get easy and cheap access to loans. Thus, someone like George Soros may easily give a call to his banker and get a million dollar loan in an instant to buy more assets. A poor or even middle-class person will not get such a million dollar loan so easily, rather they will observe how asset prices are being pushed up and they keep getting relatively poorer. Thus, our fiat monetary system is one often neglected reason for an increasing wealth inequality."
- Philipp Bagus
link here to the transcript

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