In theory, rate cuts helps the economy because companies could now borrow money with less interest to pay to expand their businesses and create jobs. This does happen but it doesn't translate to better living conditions or costs of living going down. New jobs meant more people are now earning money which they spend for commodities, services, and pay debt. This consumer spending drives the inflation up which raises costs of everything else and profit margins of the companies. If the wage rates don't keep up with this inflation, people would still have a difficult time living within their means and accumulate even more debt to sustain their current lifestyle. This leads to more consumer spending as banks can lend money with less interest rates.
Here's the catch, the rich owns the companies that provide goods, services, your debt and the government's debt. Eventually, all this money injected into the system will find its way into the hands of the few that own most of the wealth in the country. The rate cuts also incentivizes the wealthy to accumulate even more property that could later be converted to rental properties. The government owes the wealthy few and this is paid back from the taxes collected.
With recessions coming, the impact of this wealth accumulated by the few could costs the future generations better living conditions. You may be earning more than your grandparents but your money's purchasing power decreased due to inflation. The Generational Lie about working hard is real and the American dream where you can just do 9-5 jobs and be able to provide for your family is gone.
When people think of their house as an asset, it's not entirely off the mark as it contributes to one's net worth on paper. But this can be a liability since you still pay for property taxes and mortgages on it. Unless it's an asset than generates you income from rent or the same venue you put up your business, it's just leaking money. Don't get me wrong, it's still an asset and home prices have inflated but to even get a taste of this value, you have to sell your home otherwise it's just an asset that you have to pay taxes for owning. For the middle class that wants to acquire a home and stuck with a XX years to pay their mortgages, you only need some missed payments and then all that effort trying to acquire the property over the years gets wasted and the deed goes back to your lender. The wealthy own their homes and this was acquired from the previous generations so you see the advantage people living with generational wealth have over others? they don't need to worry about mortgages the way most middle class do, the starting money can just be handed to them from the previous generation.
House prices increase due to inflation but the inflation often reported often refers to goods and services. The charts may show a decline in housing inflation rate but it still an inflation rate and a change in percentage in the short term may not mean much but give the it over the course of a decade and two, you'll see buying a house back then was the right decision than doing it now because inflation devalued people's money and times when the lowered interest rates motivated the rich to acquire more land to sell it to future home buyers.
So now the market is anticipating for a rate cuts due to inflation rates falling and unemployment rates rising, even indicator's the Sahm's rule warns a recession is coming, but I've already mentioned before that Recessions make the rich richer. Because while people are struggling with a failing economy and desperate to liquidate their assets for cash to live, the wealthy are buying up a bargain and unloading money they've saved up for times like these.
The growing wealth inequality will keep getting worse if we just have a mechanism that gives money to the wealthy few while no reliable mechanism to take that money back into circulation. And these wealthy few don't really have high consumption costs that can stimulate the economy as much as the middle class. The poor are already in survival mode and by default, allocate most of their budget to essential goods. On the other hand, the middle class has some room for luxury but are taxed more and punished even more by shouldering most of the economic burdens in society.
You have 1 rich person that orders steak at a restaurant vs 100 middle class that orders the same steak each at the restaurant. Which one would generate the restaurant more profits? those profits get taxed. While the rich can spend a lot of luxury goods, generally there's only a few of them that it's easy for them to get satiated. It's the middle class that has more consumption of goods and services that stimulate the economy and these are the groups already taxed the most. When covid-19 happened, the rich just had to cancel their vacation plans and stay at home, that excess money mean for luxury piles up while everyone else was coping with decreased wages and subsidies, even taking more debt to survive. So when the lockdowns got lifted, you get some revenge spending that drives up inflation and growth but the middle class now have to more debts to pay acquired during the pandemic.
Until there is a mechanism to convince the rich to consume more goods and services, they'll just keep accumulating wealth as the flow of money leads all the way back to them in society. The government owes them money, the government's debt is something you pay with your taxes.
Inspired by Gary Stevenson's Wealth Inequality Videos
Thanks for your time.