I am half way thru The Big Short by Michael Lewis. It brings us into the world of repackaging subprime mortgages to investors. The basic idea is mortgage brokers gave poor immigrants with no documented income quarter of a million dollars. The mortgage brokers then sold the loan to firms which bundled them together into a collateralized debt obligation (CDO). This basically transferred the money from a rich wall street firm to a poor person. Those CDOs where then bundled in bigger groups of CDO. Insurance was also created on these CDOs called credit default swaps or CDS.
Thus we have a case study for what happens when the redistribution of wealth from rich to poor occurs. So let's look at what happened. Did everyone thrive? Did our economy become very heathy as Aftershock's author Robert Reich believes?
Unfortunately, no. We created a housing bubble which is still reeking havoc throughout the entire world. I then we can call this the final proof that redistribution of wealth from rich to poor doesn't "work"