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Poor people pay interest, rich people collect it. This creates a situation where the same $1 has less value to a poor person because it has interest paid attac

Poor people pay interest, rich people collect it. This creates a situation where the same $1 has less value to a poor person because it has interest paid attached, and $1 to a rich person will have interest/investment gained attached. It is that difference, as well as starting funds/wealth for investment, that creates the exponential growth for wealth and the enormous advantage wealth gives to market actors when inequality is high. Wealth grows at like O(n log n) or better, while poor wealth shrinks sometimes at less than O(1) Combine that with rich people on average spending less of their overall wealth into the consumer economy (not just investments or hoarding it during down markets -- a problem that exacerbates crashes) and you have a system that will get much worse. Policy is failing currently at getting money to move to all parts of the economy and the velocity of money has fallen off a cliff and is in a freefall due to the hoarding/inequality that has grown since 2000 intensely [1]. [1] https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V

averagewall 9y ago
Poor people don't even try to invest money or to get richer. That's probably mostly why they're poor in the first place. They spend money on gambling where the expected profit is negative but not on real life "gambling" with positive expected profit. The minimum investment amount isn't really that strong a barrier. There are online brokerages that let you buy shares cheaply. I think it's more that they lack the skills or motivation, not lack the money. Why weren't the world's poor flocking to bitcoin when it started? No minimum investment at all! It's because they weren't interested in investing and didn't do the research.
- drawkbox 9y ago
  True there is a financial education problem but many poor/middle level people just don't have as much money for investment, typically they are in needs based spending mode. Investment is the most important thing to growing wealth but also we can't just have an economy of only investment, someone needs to actually buy things in the economy. Typically the lower/middle end spending keep the consumer economy afloat with larger spending on consumer products that make those investments worth it because there is demand. You have to have people buying for demand, to then invest in supply, demand always comes first or else wealth doesn't invest. Further, wealth simply cannot buy enough to keep the whole economy afloat and wealthy people invest to retain more wealth not necessarily return it to the economy, whereas poor/middle range players spend to survive. When there is a market crash, wealth stops investing, poor/middle keeps on buying which is key. When there is inequality and only investment, downturns get harsher and harsher eradicating demand and thus eradicating investment opportunities.
  - averagewall 9y ago
    In terms of percentage gains they can do almost as well. Put a dollar in the bank and in 20 years you'll have $2. But I agree that having $2 isn't being rich. Or for middle class people, buy a house in a neighborhood before a property boom and sell after. Guessing future property values is just as hard for both the rich and the poor. You still have to work to find out and risk bad luck.
    - uoaei 9y ago
      Casting the risk that both need to take as equal is a terrible disservice to those with less money. They have less emergency fund, thus less credit-worthiness and a much, much higher risk of introducing a lot of pain and stress into their lives if things go south on a bad deal. Rich people have a lot of safety nets, and usually have the luxury of taking out a loan or working out a better deal after things go bad, whereas a person with less money will be shooed away two steps into the door of any banking or loan establishment that isn't solely a predatory one.

averagewall 9y ago

Poor people don't even try to invest money or to get richer. That's probably mostly why they're poor in the first place. They spend money on gambling where the expected profit is negative but not on real life "gambling" with positive expected profit. The minimum investment amount isn't really that strong a barrier. There are online brokerages that let you buy shares cheaply. I think it's more that they lack the skills or motivation, not lack the money. Why weren't the world's poor flocking to bitcoin when it started? No minimum investment at all! It's because they weren't interested in investing and didn't do the research.

drawkbox 9y ago
True there is a financial education problem but many poor/middle level people just don't have as much money for investment, typically they are in needs based spending mode. Investment is the most important thing to growing wealth but also we can't just have an economy of only investment, someone needs to actually buy things in the economy. Typically the lower/middle end spending keep the consumer economy afloat with larger spending on consumer products that make those investments worth it because there is demand. You have to have people buying for demand, to then invest in supply, demand always comes first or else wealth doesn't invest. Further, wealth simply cannot buy enough to keep the whole economy afloat and wealthy people invest to retain more wealth not necessarily return it to the economy, whereas poor/middle range players spend to survive. When there is a market crash, wealth stops investing, poor/middle keeps on buying which is key. When there is inequality and only investment, downturns get harsher and harsher eradicating demand and thus eradicating investment opportunities.
- averagewall 9y ago
  In terms of percentage gains they can do almost as well. Put a dollar in the bank and in 20 years you'll have $2. But I agree that having $2 isn't being rich. Or for middle class people, buy a house in a neighborhood before a property boom and sell after. Guessing future property values is just as hard for both the rich and the poor. You still have to work to find out and risk bad luck.
  - uoaei 9y ago
    Casting the risk that both need to take as equal is a terrible disservice to those with less money. They have less emergency fund, thus less credit-worthiness and a much, much higher risk of introducing a lot of pain and stress into their lives if things go south on a bad deal. Rich people have a lot of safety nets, and usually have the luxury of taking out a loan or working out a better deal after things go bad, whereas a person with less money will be shooed away two steps into the door of any banking or loan establishment that isn't solely a predatory one.