The robot economy and the new rentier class | FT Alphaville
In our opinion that one paragraph explains today’s reality perfectly.
So, robot and technology power is reducing the natural employment rate. But rather than our subsidising those who have lost jobs to technology, so as to spread that manna wealth that’s literally dropped onto the surface of the earth at no-one’s physical disadvantage, companies are using monopoly power to extort rents on the capital that is creating all that free wealth.
That’s why inequality is rising.
As technology proceeds in a patent-obsessed world, the fruits of innovation flow to the owners of the capital and invention, forming a whole new rentier class. The financial assets/debts that back the innovation technology, meanwhile, get disproportionally valuable as their purchasing power gets completely out of whack with the output they radically accelerate.
If you think about it, inequality is always going to be the natural consequence of a technologically-driven deflationary environment. Whereas in inflation, those with financial claims (a.k.a money) are impoverished as their purchasing power is eroded, while those in debt are enriched — in deflation, those with financial claims (the result of increasing rentier flows, if Krugman’s point is valid) become enriched as those in debt become increasingly impoverished.
In that sense QE and any move to “debase” financial claims is a move to dilute the wealth effect on legacy claims, which now claim a disproportionate share of available output, at least compared to what they did when they were created.
Low interest rates in many ways are thus only self-correction mechanism bringing the system back to balance — trying to offset the growing power of the innovation-based capital rentier class.
In that context it’s understandable that the older the claim, the more preferable it is to hoard it, since the greater its claim over today’s output. And in an environment where such claims are self-correcting anyway — via capital destruction brought on by negative rates, as people rush to invest in anything that gives them disproportional access to output and thus crowd each other out — that some of the rentier class see it logical to hoard in non-perishable assets “which cannot be debased” instead is an understandable consequence.