“Wipe out rentiers with cheap money”
- Headline of a Martin Wolf column published in the ‘Financial Times’, 6 May 2014.
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The Oxford English Dictionary defines rentier simply as “One who makes an income from property or investment”.
We must suspect that Martin Wolf has a somewhat more morally judgmental definition, as befits someone who does a passable impression of being a de facto Marxist:
“Low interest rates are certainly unpopular, particularly with cautious rentiers. But cautious rentiers no longer serve a useful economic purpose. What is needed instead are genuinely risk-taking investors. In their absence, governments need to use their balance sheets to build productive assets. There is little sign that they will. If so, central banks will be driven towards cheap money. Get used to it: this will endure.”
Cheap money certainly endured; interest rates throughout western markets would not rise by any meaningful degree for another seven years following the publication of the article in question.
In any event, at the time, his recommendation that rentiers should be ethnically cleansed from the economy was not met with universal acclamation by FT readers. Here are some of the fruitier reader responses:
“The FT at its worst, from the stable of big brains and small minds. Summary – stuff all savers and pensioners; reward stupid and feckless borrowers, especially governments. MW misses the essential point that if savers are paid even modest interest rates they will have money to spend which unlike the feckless they deserve and are likely to spend wisely. This spending will boost consumption and investment in the economy, instead of being used to support lost causes and fools.”
“All you have to offer the world is more of the same unsustainable credit booms ! You and your profession failed before the crisis and do so now.”
“This is a frightening and surreal article from a failure in an utterly discredited profession. Shameful.”
“This is why economics as a subject at university must be abandoned…there is just no point to its study.”
“I’ll be sure to tell my grandparents they need to become ‘genuinely risk-taking investors’.”
“Blow it all up with cheap money. Perfect strategy, perfect execution. Bravo!”
“Thank you so much for reducing the endeavour and purpose of my entire life to nought, with one casual phrase. Those who have worked hard all their lives and saved do have feelings, even if despised by you.”
“So Wolf wants to reduce pensioners to abject poverty unless they take equity risk. Does the FT offer a defined benefits scheme?”
“I often think MW inhabits a different universe from me. One in which the Soviet Union had never existed. Where the Japanese hadn’t blown 100% of GDP or more on government-sponsored infrastructure. Where the Chinese hadn’t spent the last six years specifically following the hackneyed Keynesian prescriptions of Wolf and the IMF and astonishingly now found itself with a colossal Pandora’s box of insolvencies…”
“The rentiers in this system are those feeding off QE – not those trying to squeak a living on savings.”
“It appears that what the readers have to endure and get used to is the stuck record Martin Wolf droning on and on about increased government spending being the solution to everything, no matter what the question being asked.”
“As usual Mr Socialist you have no clue. I love reading you just to know the depth of the bankruptcy of the intelligentsia.”
“You, Mr Wolf, are a disgrace and may I say a Quisling hiding in the propaganda press. This is no longer a free press, it does the bidding of its masters in the corporate world who own you.”
“I called Martin Wolf a socialist in a comment last week and was firmly put back in my box by Mr.Wolf when he called me ‘a misguided human being’. The tone of the comment was pretty unpleasant (because he disagreed with my point of view). But the views/suggestions he puts across do to me seem of a socialist bent rather than a capitalist one, in that I don’t read him supporting ideas such as reduced taxes, reduced government, reduced government borrowing, reduced taxes, reduced red tape, reduced governmental interference in fact he seems to propound more of these which to me is socialism but heh ho I may be wrong:-) but if he is a capitalist I do wish he would use his position to support us!”
“It is time for Mr.Wolf to retire. You are proposing disincentives for accumulating capital. Money printing is not capital and since when is it the government’s right and obligation to tell us what to do with our money? Neo liberal economic policy is left wanting after 6 years of experimentation and now you propose something more radical? Let markets decide where capital should go. Your proposal is dangerous and foolhardy.”
“It never ceases to surprise me that people who utter these things are allowed to work in the finance industry. If you were a bridge engineer your bridge would have fallen and your licence for ever revoked…luckily you are an economist (socialist/communist) so with a bit of luck you will be nominated for a Nobel prize.”
“But why let facts get in the way of a tired, 3rd rate article? Having said that I have trouble believing even MW believes this garbage, so presumably it’s all just click-bait..”
“When you say ‘cautious rentiers’ are not serving any economic purpose, I think you are saying that after a financial crisis caused by individuals, banks and governments who over-leveraged themselves and brought on 5 years (and counting…) of financial repression, there is a long way to go to economic recovery and the debtors of this world deserve a still longer break so that they can sort themselves out at the expense of creditors. Oh, and please could the people who stayed sane and sensible please put a bit more risk on while you’re at it?”
“Please – do not use ‘rentier’ as a substitute for ‘saver’. I have not come across a good definition of ‘rentier’ yet – if the word is to be used, it needs to be backed by a good definition and any definition will fall short unless it captures the idea that the rentier is earning returns which are somehow unearned. In the meantime, ‘cautious savers’ trying to make a return on money saved out of fully taxed employment income deserve better from the FT than suggestions that they should be ‘wiped out’.”
“Wrong. These unprecedented policies are needed by the bankers and politicians who maintain their positions of power and wealth via artificially high prices. In other words, there is one price structure (higher) which allows the current debt-laden and corrupt system (and the puppetmasters who run it) to remain in place. There is another price structure (lower) which allows the middle and lower classes to benefit from ongoing productivity improvements. There is only a “deficiency” of demand at the crazy price levels promulgated by the keepers of the status quo. The only thing “chronic” is the inability of TPTB to see the simple fact that the over-levered system as it exists today cannot last. And postponing the day of reckoning (like Japan) only increases the ultimate pain.”
“It is the intervention by the central banks and the obvious manipulation of the markets that is preventing the true risk-taking investors from entering the markets. Presently, the free markets are truly not free.”
“The article doesn’t actually say why wiping out cautious savers would be a good thing. The line of reasoning seems to be:
- There’s a mismatch between savings and investment
- Therefore, market forces should generate low returns to savers
- Therefore, savers don’t morally deserve good returns
- Therefore, central banks should intervene to ensure low returns to savers
Does C follow from B? And if B is true, then why is D necessary? One could just as easily reason as follows:
- Central banks are intervening in the market to artificially lower returns to savers
- Therefore, market forces if left to themselves would be generating higher returns
- Therefore, savers morally deserve higher returns than they currently receive
- Therefore, the rentiers should revolt and overthrow the central banks.”*
*This correspondent fully endorses this proposal.
“Is this article a joke?”
“After reading this article I am seriously questioning the rationale behind my FT subscription.”
Our own perspective is as follows.
Policy interest rates throughout the developed world were driven down to all-time lows and perforce had to remain there for some time (and for at least a further seven years) in order to reflate a broken banking system. Central banks were, and remain, desperate to avoid true deflation since that would threaten the very existence of their grossly indebted client governments. Savers (the class of people we presume Martin Wolf refers to when he uses the disdainful term ‘rentiers’) are the blameless victims who were forced to pay the price for unprecedented government and banking sector overspending.
Government was never the solution, it was the primary cause of the problem. And government does not create wealth, it merely redistributes it. The rational investor of today faces an almost insoluble dilemma: shelter in cash-type investments whose purchasing power, despite nominally higher rates, is being eroded on a daily basis by explicit inflationism, and run the risk of a systemic fiat currency disaster into the bargain (courtesy of now unpayable sovereign debt loads, and multiple governments whose economic policies now seem to be those of the madhouse); or pursue returns from risk assets which have been inflated artificially higher, for years, on a now monstrous bubble of monetary stimulus. We believe the rational response is to combine diversification (across asset classes that include hard assets) with concentration (on compelling defensive value, especially in listed companies within the precious metals and commodities sectors).
‘Rentier’ is a word with French origins. Another word with French origins is ‘charlatan’.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you, too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio -with no obligation at all:
Get your Free
financial review
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks.
“Wipe out rentiers with cheap money”
—
Get your Free
financial review
—
The Oxford English Dictionary defines rentier simply as “One who makes an income from property or investment”.
We must suspect that Martin Wolf has a somewhat more morally judgmental definition, as befits someone who does a passable impression of being a de facto Marxist:
“Low interest rates are certainly unpopular, particularly with cautious rentiers. But cautious rentiers no longer serve a useful economic purpose. What is needed instead are genuinely risk-taking investors. In their absence, governments need to use their balance sheets to build productive assets. There is little sign that they will. If so, central banks will be driven towards cheap money. Get used to it: this will endure.”
Cheap money certainly endured; interest rates throughout western markets would not rise by any meaningful degree for another seven years following the publication of the article in question.
In any event, at the time, his recommendation that rentiers should be ethnically cleansed from the economy was not met with universal acclamation by FT readers. Here are some of the fruitier reader responses:
“The FT at its worst, from the stable of big brains and small minds. Summary – stuff all savers and pensioners; reward stupid and feckless borrowers, especially governments. MW misses the essential point that if savers are paid even modest interest rates they will have money to spend which unlike the feckless they deserve and are likely to spend wisely. This spending will boost consumption and investment in the economy, instead of being used to support lost causes and fools.”
“All you have to offer the world is more of the same unsustainable credit booms ! You and your profession failed before the crisis and do so now.”
“This is a frightening and surreal article from a failure in an utterly discredited profession. Shameful.”
“This is why economics as a subject at university must be abandoned…there is just no point to its study.”
“I’ll be sure to tell my grandparents they need to become ‘genuinely risk-taking investors’.”
“Blow it all up with cheap money. Perfect strategy, perfect execution. Bravo!”
“Thank you so much for reducing the endeavour and purpose of my entire life to nought, with one casual phrase. Those who have worked hard all their lives and saved do have feelings, even if despised by you.”
“So Wolf wants to reduce pensioners to abject poverty unless they take equity risk. Does the FT offer a defined benefits scheme?”
“I often think MW inhabits a different universe from me. One in which the Soviet Union had never existed. Where the Japanese hadn’t blown 100% of GDP or more on government-sponsored infrastructure. Where the Chinese hadn’t spent the last six years specifically following the hackneyed Keynesian prescriptions of Wolf and the IMF and astonishingly now found itself with a colossal Pandora’s box of insolvencies…”
“The rentiers in this system are those feeding off QE – not those trying to squeak a living on savings.”
“It appears that what the readers have to endure and get used to is the stuck record Martin Wolf droning on and on about increased government spending being the solution to everything, no matter what the question being asked.”
“As usual Mr Socialist you have no clue. I love reading you just to know the depth of the bankruptcy of the intelligentsia.”
“You, Mr Wolf, are a disgrace and may I say a Quisling hiding in the propaganda press. This is no longer a free press, it does the bidding of its masters in the corporate world who own you.”
“I called Martin Wolf a socialist in a comment last week and was firmly put back in my box by Mr.Wolf when he called me ‘a misguided human being’. The tone of the comment was pretty unpleasant (because he disagreed with my point of view). But the views/suggestions he puts across do to me seem of a socialist bent rather than a capitalist one, in that I don’t read him supporting ideas such as reduced taxes, reduced government, reduced government borrowing, reduced taxes, reduced red tape, reduced governmental interference in fact he seems to propound more of these which to me is socialism but heh ho I may be wrong:-) but if he is a capitalist I do wish he would use his position to support us!”
“It is time for Mr.Wolf to retire. You are proposing disincentives for accumulating capital. Money printing is not capital and since when is it the government’s right and obligation to tell us what to do with our money? Neo liberal economic policy is left wanting after 6 years of experimentation and now you propose something more radical? Let markets decide where capital should go. Your proposal is dangerous and foolhardy.”
“It never ceases to surprise me that people who utter these things are allowed to work in the finance industry. If you were a bridge engineer your bridge would have fallen and your licence for ever revoked…luckily you are an economist (socialist/communist) so with a bit of luck you will be nominated for a Nobel prize.”
“But why let facts get in the way of a tired, 3rd rate article? Having said that I have trouble believing even MW believes this garbage, so presumably it’s all just click-bait..”
“When you say ‘cautious rentiers’ are not serving any economic purpose, I think you are saying that after a financial crisis caused by individuals, banks and governments who over-leveraged themselves and brought on 5 years (and counting…) of financial repression, there is a long way to go to economic recovery and the debtors of this world deserve a still longer break so that they can sort themselves out at the expense of creditors. Oh, and please could the people who stayed sane and sensible please put a bit more risk on while you’re at it?”
“Please – do not use ‘rentier’ as a substitute for ‘saver’. I have not come across a good definition of ‘rentier’ yet – if the word is to be used, it needs to be backed by a good definition and any definition will fall short unless it captures the idea that the rentier is earning returns which are somehow unearned. In the meantime, ‘cautious savers’ trying to make a return on money saved out of fully taxed employment income deserve better from the FT than suggestions that they should be ‘wiped out’.”
“Wrong. These unprecedented policies are needed by the bankers and politicians who maintain their positions of power and wealth via artificially high prices. In other words, there is one price structure (higher) which allows the current debt-laden and corrupt system (and the puppetmasters who run it) to remain in place. There is another price structure (lower) which allows the middle and lower classes to benefit from ongoing productivity improvements. There is only a “deficiency” of demand at the crazy price levels promulgated by the keepers of the status quo. The only thing “chronic” is the inability of TPTB to see the simple fact that the over-levered system as it exists today cannot last. And postponing the day of reckoning (like Japan) only increases the ultimate pain.”
“It is the intervention by the central banks and the obvious manipulation of the markets that is preventing the true risk-taking investors from entering the markets. Presently, the free markets are truly not free.”
“The article doesn’t actually say why wiping out cautious savers would be a good thing. The line of reasoning seems to be:
Does C follow from B? And if B is true, then why is D necessary? One could just as easily reason as follows:
*This correspondent fully endorses this proposal.
“Is this article a joke?”
“After reading this article I am seriously questioning the rationale behind my FT subscription.”
Our own perspective is as follows.
Policy interest rates throughout the developed world were driven down to all-time lows and perforce had to remain there for some time (and for at least a further seven years) in order to reflate a broken banking system. Central banks were, and remain, desperate to avoid true deflation since that would threaten the very existence of their grossly indebted client governments. Savers (the class of people we presume Martin Wolf refers to when he uses the disdainful term ‘rentiers’) are the blameless victims who were forced to pay the price for unprecedented government and banking sector overspending.
Government was never the solution, it was the primary cause of the problem. And government does not create wealth, it merely redistributes it. The rational investor of today faces an almost insoluble dilemma: shelter in cash-type investments whose purchasing power, despite nominally higher rates, is being eroded on a daily basis by explicit inflationism, and run the risk of a systemic fiat currency disaster into the bargain (courtesy of now unpayable sovereign debt loads, and multiple governments whose economic policies now seem to be those of the madhouse); or pursue returns from risk assets which have been inflated artificially higher, for years, on a now monstrous bubble of monetary stimulus. We believe the rational response is to combine diversification (across asset classes that include hard assets) with concentration (on compelling defensive value, especially in listed companies within the precious metals and commodities sectors).
‘Rentier’ is a word with French origins. Another word with French origins is ‘charlatan’.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you, too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio -with no obligation at all:
Get your Free
financial review
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks.
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