What Occupy Wall Street protesters don't understand
Protesters are right that income inequality is a major problem. But many on the Left support policies that would exacerbate that problem.
I haven't yet written about the so-called "Occupy Wall Street" movement, which is a left-wing version of the Tea Party, though unlike the Tea Party it seems to be spreading across the world.
I have no sympathy for the movement because of its goal of expanding government, but one of their grievances is at least in America partly legitimate, namely the record high level of inequality.
If all rich people were real creators like the late Steve Jobs, then it wouldn't have been a problem, but because many people have become rich because of bank bailouts and inflationary monetary policies then it is not entirely unproblematic.
The problem is that almost all leftists, including those in "Occupy Wall Street" fails to understand this and in fact supports these policies. As for example the Rortybomb and Free Exchange blogs note however, a few people seems to have been convinced by the Ron Paul campaign and other Austrians that Fed policy is a significant cause of inequality.
Rortybomb dismisses this with the pathetic argument that this view can't be right because the AFL-CIO doesn't believe in it. Free Exchange makes the somewhat more sophisticated argument that because Fed policy pushes down Treasury yields, it will in fact hurt bankers.
But as superficially plausible as this argument may be, it doesn't hold for closer scrutiny. On securities they alread hold, the yield is already fixed and the lower yield in current trading is therefore fully compensated for by higher prices of those securities. And on the new securities they because of the expanded Fed balance sheet, they will see their profits increase because on the margin they still generate significant profits. Not to mention how much profits they can gain by buying other assets.
Both of course also completely ignore the distributional effects of higher stock prices (disproportionately benefiting the top 1%) and higher commodity prices (disproportionately hurting the poor).
It is true that a few rich people might be hurt, namely those that hold their wealth in cash in for example giant money bins. But though the fictional Scrooge McDuck does that, extremely few, if any, real life people do that. More common would be people who save in bank accounts or short-term securities who also loses from inflation. However, that is far from enough to offsett more than a small part of the inequality increasing mechanisms that I mentioned.
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