Thursday, October 17, 2013

Wealthy people benefited more from money printing

In an ideal world money printing from the Fed would flow evenly into all sectors. The fed probably do believe that their money printing program is working just fine. Others like Marc Faber are skeptical.

"The problem is that the money doesn't flow evenly into the system but it flows into some sectors at different times and it creates booms in some sectors of the economy."

Who and which sectors in the economy benefits from uneven money flow ? Dr Faber says "The major beneficiaries of the most recent monetary inflation based in 2008 have been people closest to the source of the liquidity. In other words the financial sector, hedge fund and bond managers, private equity firms and large asset holders; because if you look at, say, who owns shares in the U.S.; the majority of people have no shareholding to speak of. It’s the minority, maybe five percent of the population, that holds the majority of shares. So the money printing has actually been very beneficial to well-to-do people. That’s why some high-end property prices are at record highs. It’s been also beneficial to people with money in emerging economies because a lot of funds flow into emerging economies due to the huge U.S. trade and current account deficits and it has been rather detrimental to the middle class and the working class because their costs of living have risen more than their wages."