5 ms·

no, the wealthy keep their capital in assets with above average returns. the rest of us get to pay for that with below average returns, fees, and inflation.

travisoneill1 8y ago
Yes that would explain them being rich. But I'm sure you have heard the phrase "Past performance is no guarantee of future results." What I am talking about here is debt. Owe money on your house? Inflation makes you owe less. Lend money to someone buying a house? Inflation means you get paid back less.
- rabidrat 8y ago
  It's only "less" if your wages also inflate. But your food and housing prices increase on the leading edge of inflation, and wages lag. And often they never catch up.
  - chimeracoder 8y ago
    > It's only "less" if your wages also inflate. But your food and housing prices increase on the leading edge of inflation, and wages lag. And often they never catch up. Except that's not true. If you're a debtor, the effects of inflation decreasing your debt in real dollars is orders of magnitude more consequential than the increase in your expenses, and that's even assuming your wages don't increase (which is generally not true either).
- betterunix2 8y ago
  Inflation is typically priced into loans in the form of higher interest rates; this is why bond prices fall (i.e. yields rise) when the inflation rate increases (or more precisely, when people believe inflation will be higher in the future). Also priced in is the uncertainty about future inflation, which is one reason why central banks work to maintain a stable rate of inflation.
kgwgk 8y ago
How does the math work out if the wealthy have much more capital than "the rest of us"? Why have you chosen to keep your capital in assets with below-average return if you know which are the better assets?
- zimablue 8y ago
  Better individual assets or better management of your assets are both gated. Privately held companies, hedge funds, financial managers. The guy who argues the parent point is Piketty in the book Capital.
  - longerthoughts 8y ago
    On top of the access issue is the financial knowledge gap between people of different socioeconomic backgrounds. Not only are people limited in what they can invest in, but they might not even be investing at all.

travisoneill1 8y ago

Yes that would explain them being rich. But I'm sure you have heard the phrase "Past performance is no guarantee of future results." What I am talking about here is debt. Owe money on your house? Inflation makes you owe less. Lend money to someone buying a house? Inflation means you get paid back less.

rabidrat 8y ago
It's only "less" if your wages also inflate. But your food and housing prices increase on the leading edge of inflation, and wages lag. And often they never catch up.
- chimeracoder 8y ago
  > It's only "less" if your wages also inflate. But your food and housing prices increase on the leading edge of inflation, and wages lag. And often they never catch up. Except that's not true. If you're a debtor, the effects of inflation decreasing your debt in real dollars is orders of magnitude more consequential than the increase in your expenses, and that's even assuming your wages don't increase (which is generally not true either).
betterunix2 8y ago
Inflation is typically priced into loans in the form of higher interest rates; this is why bond prices fall (i.e. yields rise) when the inflation rate increases (or more precisely, when people believe inflation will be higher in the future). Also priced in is the uncertainty about future inflation, which is one reason why central banks work to maintain a stable rate of inflation.

kgwgk 8y ago

How does the math work out if the wealthy have much more capital than "the rest of us"? Why have you chosen to keep your capital in assets with below-average return if you know which are the better assets?

zimablue 8y ago
Better individual assets or better management of your assets are both gated. Privately held companies, hedge funds, financial managers. The guy who argues the parent point is Piketty in the book Capital.
- longerthoughts 8y ago
  On top of the access issue is the financial knowledge gap between people of different socioeconomic backgrounds. Not only are people limited in what they can invest in, but they might not even be investing at all.