[nichohel]

QE may make "the rich" seem richer in nominal terms, but in reality they are generally poorer. Here is what I mean:

If the house I paid $250,000 for ten years ago is now "worth" $1,000,000 due to asset inflation arising from quantitative easing, I still own the same house. I am not really richer in a real sense as long as I still hold the house. I have $750,000 more nominal dollars in assets, but the dollar is just a unit of accounting. The house has not changed!

If I then try to actually realize some of that nominal dollar gain by selling the house, I will pay about $250,000 "capital gains" tax on $750,000 even though I have not really seen any real-world gain (the house did not change). The government primarily benefits from this tax paid. So maybe I actually get to see $500,000 in nominal gain, after I pay the tax.

But then I can use the post-tax "gain" of $500,000 to buy fun things, like better food or a cool car or a better house? Not really, if the food or car or house has also doubled in price over that interval. In fact, by assumption houses have tripled in price over this interval, and with tax losses I am worse off if I put the money in a new house, because now my $500,000 in gain plus the $250,000 I started with won't even buy as good a house as my old $250,000 house was, which now costs $1,000,000. [Edited to include the $250,000 I started with. The concept is unchanged.]

The same argument applies to increasing stock values. QE inflation makes people seem nominally richer, but in reality capital gains taxes actually make them poorer if they try to utilize these nominal gains.

There are subtleties to this argument and the step-up basis issue is a real thing (which would only prevent the frictional loss of taxation!) but the main point above does not seem to be appreciated.

[pashamur]

The poorer/richer argument only makes sense in the context of a specific consumption basket. If your main goal in life is to buy as many bananas as you can (for example), then you would measure the house appreciation in bananas. Can you get more bananas for your house now (at $1M - 250k) than you could when you got it? Then you're "richer", otherwise you're not.

Usually we use CPI as a proxy for it. However, most people when evaluating houses ignore the implied rent paid; owning a house means not having to pay rent - and that has a specific price on it, depending on your local rental market. So in a relative sense, you owning that house makes you richer relative to the people that did not own a house (who did not get the same nominal appreciation at all and are much worse off), and leaves you at the same place with other people owning the house. You're unlikely to be worse off (on a relative standing) than if you hadn't gotten the house. So I'm not sure richer/poorer makes sense without considering the alternatives (i.e. renting & investing)

[ItsMonkk]

The Fed tracks inflation using the CPI, the price of things that are consumed. Food is an example of a consumed good. Housing is not, that is an investment. The portion of housing in the CPI is of the rent of the time that is now in the past you consumed on it.

Housing is increasing in value faster than food or cars. So yes, you are better off. Housing is increasing at equal rates with housing, but you can leverage, so you are better off.

You didn't pay $250k for that house, you paid $50k and another ~100k over that 10 years. When you sell, you realize that $750k profit, which yes you will be taxed on some of that, but you can now take that $500k and put it into a $2.5M home. That $2.5M home will be better than your $250k home.

Leverage is risk, yes. But in a QE environment, not leveraging is the ultimate risk.

[clairity]

that’s because the primary house of an assetholder is a non-productive asset. this factor is one of the reasons why housing (especially single-family homes) being considered an investment is fraught. only income-producing assets (excluding rents, because that’s not income but rather deadweight loss) should be considered investments.

[nichohel]

As I said, this concept also applies to other asset classes inflated by QE, such as stocks. I didn't say the house was the primary house (in which case there is some capital gain exclusion complicating matters anyway).

So, no.