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M.Rentier & M.Charlatan

Maybe the FT 's star columnist doesn't really believe his position either...
The OXFORD ENGLISH DICTIONARY defines rentier simply as "One who makes an income from property or investment," writes Tim Price on his blog, The Price of Everything.
We must suspect that Martin Wolf has a somewhat more morally judgmental definition, as befits someone who does a passable impression of being a confused 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.”  - Martin Wolf, ' Wipe out rentiers with cheap money', Financial Times, 6 May 2014
In any event, 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'."
Economist Shaun Richards responded to Martin Wolf's article with this eloquent rebuttal. Our own perspective is as follows.
Policy interest rates throughout the developed world are at all-time lows and must remain there for some time in order to reflate a broken banking system. Central banks are 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 must pay the price for unprecedented government and banking sector overspending.
Government is not the solution, it is 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 is being eroded on a daily basis by explicit inflationism; or pursue returns from risk assets which have been inflated artificially higher on a bubble of monetary stimulus. We believe the rational response is to combine diversification (across asset classes that include hard assets) with concentration (on compelling deep value). 
'Rentier' is a word with French origins. Another word with French origins is 'charlatan'.
London-based director at Price Value Partners Ltd, Tim Price has over 25 years of experience in both private client and institutional investment management. He has been shortlisted for the Private Asset Managers Awards program five years running, and is a previous winner in the category of Defensive Investment Performance.
See the full archive of Tim Price articles.


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