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The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. A widening w

The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. A widening wealth gap can only occur if the wealthy are investing their money and getting good returns on it. If the wealthy were hoarding their money, then it would not be growing and the wealth gap would shrink (since worker's wealth would increase, and the wealthy would consume some of their wealth).

pdkl95 10y ago
> A widening wealth gap can only occur if the wealthy are investing their money That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Why do you think interest rates have been kept so low? Regulators (e.g. the Fed, ECB) have been doing everything they can over the last few years to add liquidity into the market in the hope that it get banks to lend again. > If the wealthy were hoarding their money, then it would not be growing Life is rarely black and white. We're talking about people that have more than enough money to both invest as they desire and hoard a lot of money. The ability to do both increases as the wealth gap widens. > since worker's wealth would increase This is pure fantasy. How would worker wealth increase? They don't have enough money to invest, and they don't have the political power they once had. Worker wealth is going down as money accumulates in the hands of the few. > and the wealthy would consume some of their wealth Consumption (even large amounts) costs are insignificant when your wealth is sufficiently large.
- yummyfajitas 10y ago
  That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Rich guy has wealth X. He invests it all and 1 time period later he has X(1+R). If the poor guy has worse investment opportunities (as Piketty claims), then the poor guy will have wealth only x(1+r). Here x < X is the poor guy's wealth, and r < R is the poor guy's investment growth rate. The gap grows by (1+R)/(1+r). In contrast, if the rich guy hoarded he would only have wealth X, while the poor guy would have x(1+r). The gap would shrink by 1/(1+r). If, as you postulate, the rich guy invests k of his wealth and hoards (1-k) then the gap would change at the rate (1+kR)/(1+r). More hoarding = smaller k = slower growth (or shrinkage) of wealth gap. Life is rarely black and white. Try doing the math and you'll see it sometimes is.
  - pdkl95 10y ago
    What you don't seem to understand is that "r" is 0 for a very large portion of the country, and in many cases is even negative. > the poor guy's investment Except in rare cases, this doesn't exist. > Try doing the math The math is simple. The problem is your data seems to be based more on wishful thinking than actual experience and research.
    - yummyfajitas 10y ago
      My arithmetic is based only on the definition of hoarding (holding wealth without investing it) and Thomas Picketty's claim - which you just agreed with - that R > r. Why don't you do your own arithmetic to demonstrate my error?
      - dllthomas 10y ago
        While I am skeptical that it's the case, you seem to have missed the assertion that r < 0. In that case, the "shrinking" of the wealth gap by 1/(1+r) would be more accurately termed a growing by 1/(1-r).

pdkl95 10y ago

> A widening wealth gap can only occur if the wealthy are investing their money That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Why do you think interest rates have been kept so low? Regulators (e.g. the Fed, ECB) have been doing everything they can over the last few years to add liquidity into the market in the hope that it get banks to lend again. > If the wealthy were hoarding their money, then it would not be growing Life is rarely black and white. We're talking about people that have more than enough money to both invest as they desire and hoard a lot of money. The ability to do both increases as the wealth gap widens. > since worker's wealth would increase This is pure fantasy. How would worker wealth increase? They don't have enough money to invest, and they don't have the political power they once had. Worker wealth is going down as money accumulates in the hands of the few. > and the wealthy would consume some of their wealth Consumption (even large amounts) costs are insignificant when your wealth is sufficiently large.

yummyfajitas 10y ago
That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Rich guy has wealth X. He invests it all and 1 time period later he has X(1+R). If the poor guy has worse investment opportunities (as Piketty claims), then the poor guy will have wealth only x(1+r). Here x < X is the poor guy's wealth, and r < R is the poor guy's investment growth rate. The gap grows by (1+R)/(1+r). In contrast, if the rich guy hoarded he would only have wealth X, while the poor guy would have x(1+r). The gap would shrink by 1/(1+r). If, as you postulate, the rich guy invests k of his wealth and hoards (1-k) then the gap would change at the rate (1+kR)/(1+r). More hoarding = smaller k = slower growth (or shrinkage) of wealth gap. Life is rarely black and white. Try doing the math and you'll see it sometimes is.
- pdkl95 10y ago
  What you don't seem to understand is that "r" is 0 for a very large portion of the country, and in many cases is even negative. > the poor guy's investment Except in rare cases, this doesn't exist. > Try doing the math The math is simple. The problem is your data seems to be based more on wishful thinking than actual experience and research.
  - yummyfajitas 10y ago
    My arithmetic is based only on the definition of hoarding (holding wealth without investing it) and Thomas Picketty's claim - which you just agreed with - that R > r. Why don't you do your own arithmetic to demonstrate my error?
    - dllthomas 10y ago
      While I am skeptical that it's the case, you seem to have missed the assertion that r < 0. In that case, the "shrinking" of the wealth gap by 1/(1+r) would be more accurately termed a growing by 1/(1-r).