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I've argued this for years. Interest rates peaked at about the same time that wealth inequality began to diverge around 1980 or so. I don't think any of this is

I've argued this for years. Interest rates peaked at about the same time that wealth inequality began to diverge around 1980 or so. I don't think any of this is terribly complicated. Money is a commodity, and like all commodities, the price is set at the margin. Money also has diminishing marginal utility, so as you accumulate more of it, at some point it has less use. Think about two people, one extremely wealthy, one middle class. The middle class guy making $75k probably has to spend all his money for consumption: food, rent, car, etc. There's little left over for saving or investing. In order for that guy to justify forgoing consumption and instead saving it, he requires a high interest rate, otherwise it's not worth it. But what about the guy worth $100 million? He can't spend it all on consumption, so he has to save a lot of it. Ah, but what's his opportunity cost? Zero. He has no choice, and the money he'll earn from interest won't even get spent anyway. So, two people, two very different marginal costs. The world is just one giant pool of capital. Over the last four decades, as capital has shifted from being more evenly spread out amongst people with high marginal costs to a smaller group of people with marginal costs of zero, interest rates keep falling...the majority of capital now resides amongst people who can't spend it all and are happy to earn any real rate of return.

gatkinso 5y ago
Fascinating comment
giantg2 5y ago
"Money also has diminishing marginal utility, so as you accumulate more of it, at some point it has less use." Thats true assuming the same scope, like living expenses. It gets a little more nuanced if the person changes the activities in scope. If you're giving billions away in a philanthropic organization that you run (ie Gates), then you've found new utility for that money. So in some ways it has more possible uses, but less pressure to actually use it. But I think your implied point of limited choices for people with lower income/capital is still valid.
- whimsicalism 5y ago
  It's unequivocally true, diminishing marginal utility of money is basically an axiom.
  - giantg2 5y ago
    If it's unequivocally true, how about a source that shows scope does not impact it? I'm simply stating that money does not have fewer uses as one gets more of it. Usually the person's scope changes to include new uses that were not previously possible. The important thing to note is that utility is being used in mixed definition here. Strictly speaking it's definition is happiness or satisfaction. The part about having less use doesn't necessarily match this.
    - deleted 5y ago
      [deleted]
    - nonameiguess 5y ago
      Diminishing marginal utility is an axiom over fixed magnitude amounts of a good. Bill Gates still gets less out of an additional $10 even with new opportunities for philanthropy than a panhandler who is hours from starving to death and currently has $0. "Diminishing" doesn't mean it has to go to zero, but Bill Gates is not going to be in any situation where some number of dollars given to him on top of what he has means the difference between life and death. Heck, this exact fact is the very reason why Bill Gates engages in philanthropy. He realizes that other people need the money more than he does.
      - giantg2 5y ago
        Yes, but that wasn't what was explained. "Money also has diminishing marginal utility, so as you accumulate more of it, at some point it has less use." The additional money does not have less use. It's just not going to add as much to quality of life or dictate "life and death". There are still many uses for it, so of which may not be possible with lower amounts.
kiba 5y ago
Eh. Part of the reason is that living in the US is just plain expensive. According to statistics on average American household budget, 16% goes to housing. 14% goes to transportation.[1] So you can say that 30% of your consumption goes directly to land use, because cars need infrastructure and because we refuse high density housing and increased barrier for new housing supply. Taxes, which is 12%, actually comes a distant second. Also, with 75K, sounds like you would have ample amount to invest. 1. https://www.valuepenguin.com/average-household-budget https://www.valuepenguin.com/average-household-budget
- lotsofpulp 5y ago
  $75k household income with kids is a pittance in pretty much all areas of the US that have seen economic growth in the past few decades. Most people are simply skipping saving/investing sufficient funds for their old age/emergencies (a few million by 65, but I would say you need decent portion by 50 since likelihood of being unable to work starts going up a lot).
  - Miner49er 5y ago
    This is part of the reason birth rates are down.
    - lumost 5y ago
      per the article's central thesis. If Income inequality changes direction births will rise.
      - toomuchtodo 5y ago
        Unlikely. Educated, empowered women with access to family planning facilities have less children if they have any children at all. Birth rates in developed countries with more robust social safety nets and less inequality have total fertility rates below that of the US. https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have https://ourworldindata.org/fertility-rate#what-explains-the-...
nightski 5y ago
I'm not sure I agree with this. "Interest rates" in terms of savings rates are typically below inflation. The wealthy guy and the middle class guy are not going to do well keeping their money in a savings account. Both have to find better ways to allocate their money and take on a little risk. Whether that is investing in a business, stocks, real estate, whatever is a better option at that time. Low interest rates actually give middle class guy more opportunity because it becomes cheaper to borrow. You can use leverage to increase your position. The most common form of this is a mortgage, but there are many other ways to utilize debt properly as well. I'm far from an economics expert, pretty novice actually. So I am probably wrong. But as a guy who came from a lower middle class household and has utilized debt & investments to change that significantly I feel like low interest rates have been a huge part of that.
- whimsicalism 5y ago
  It really is hard to say whether it is better or worse for the "middle class guy." Sure, it makes debt more accessible and also makes debt faster to wipe out due to inflation, but low interest rates typically increase asset prices (everything else being equal, which it usually isn't) and assets are primarily owned by the wealthy.
- lotsofpulp 5y ago
  > Low interest rates actually give middle class guy more opportunity because it becomes cheaper to borrow. You can use leverage to increase your position. The most common form of this is a mortgage, but there are many other ways to utilize debt properly as well. It is the same for everyone else, hence assets get more expensive. It washes out, unless you make riskier and riskier bets to stay ahead of the curve. Some will win, but most will lose.
  - nipponese 5y ago
    But for the poor, a 2x in cost of milk isn’t as burdensome when there’s a 1.2x in hourly wage. Plus, the cost of borrowing to buy that new car went down. Even though I hate this current inflation in ALL non-cash assets, it’s been generally positive for the poor, in the short-term, anyway.
whimsicalism 5y ago
I think it's not a bad analysis, but entirely absent from your story is the Central Bank and I really don't think that can be absent from discussions of rates. By far the biggest supplier of credit are banks, not private individuals - and their supply is effectively dictated by the Fed.
- bedhead 5y ago
  The Fed is reactive. The Fed doesn't set interest rates, the market does. I believe this is one of the biggest misconceptions about our central bank. Yes, the Fed plays an obvious role, more to do with printing money for whatever the issue-of-the-day is, but the market is far more powerful than the Fed when it comes to interest rates. If the Fed raised rates 500bps tomorrow, over time, interest rates would still settle back at 0%, and all the Fed would've done is created complete dysfunction. Central banks are reactive.
  - dragonwriter 5y ago
    > The Fed doesn't set interest rates, the market does. The Fed sets interest rate targets, and the intervenes, maasively if necessary, in the market to acheive them. > If the Fed raised rates 500bps tomorrow, over time, interest rates would still settle back at 0% The only reason rates are near zero is that the Fed has set its rate target near zero and intervened massively in the market to attain that target. If the Fed raised its rate target and kept it higher, rates would rise and stay higher. When the Fed target, was higher (most of the Fed’s history), interest rates remained higher. The Fed doesn't set its targets based on what it thinks the market would do without intervention, but based on what it thinks needs to happen to achieve its balance of employment and price stability objectives. > Central banks are reactive. You bracket your post, beginning and end with it, but you don't seem to understand that all it means is that Central Bank action goals respond to observed conditions. You act as if it means the Central Bank is impotent to affect conditions, and in particular interest rates, which is clearly false.
    - chii 5y ago
      > [Feds] intervenes, maasively if necessary The Feds have some scope to nudge the interest rate, but they cannot massively change it against the market. The persistent low rates of the past 2 decades are mostly market driven, because there's been a lack of growth. The feds try to nudge lower the rates past the "natural" rate (a rate as if they weren't there), but the trend of the rates being down isn't determined by the Feds.
bluecalm 5y ago
Not sure how high interest rates mean better return from investment. I mean look at the chart from last two decades or so. If by investment you you mean giving money to the bank so the bank can loan it to other people then obviously the investment will be paid by people who need loans which is, you know, not exactly good for lower/middle class. I for one think near zero interest rates are optimal. As o long as we can ensure there isn't too much irresponsible lending. Liquidity is very important and ensuring people who can make use of the money have easy access to it is very important.
danielschonfeld 5y ago
I don't think you have explained the reason for the capital accumulating more at the one side of the margin. Or maybe I just didn't understand?
- bedhead 5y ago
  Excellent question. I believe technology is the primary culprit. Think of something like WhatsApp, which Facebook bought for about $20 billion and would be worth who-knows-how-much today. I think WhatsApp had like 70 employees, a couple founders, only took a small amount of capital, and yet created $20 billion of value in a company in just a few years. Go back a couple decades when technology couldn't scale like it can today, what would it take to create a $20 billion company? How many years, how many employees, how many suppliers, how many customers, how much capital, etc etc. Instead, it was like three guys who each made $7 billion or whatever. This word "scale" is really just code for concentration, as in, a company can grow without having to spread the wealth around, it can instead accumulate to a relatively small group of highly intelligent and creative people. Technology enables that top echelon of people to keep more for themselves. So, I would say technology in a general sense is really what's driving wealth concentration. The long-term persistency of declining rates and increasing wealth concentration tell us it has to be structural, and I'm not sure what else can explain it. But, people are often uncomfortable with this, because it's not fixable. High taxes don't fix it over time, because we can keep replaying that game over and over again and the smartest will just keep winning and amassing a disproportionate share of the wealth created.
dalbasal 5y ago
I can see the logic of this statement, and it is in line with a lot of economic thinking... but I disagree with the jist. First, the "price of money," is not set by markets if by "price of money" we mean interest rates. Interest rates are set by a central bank, which is a monopoly. IE, only the ECB can make euros. Only the Fed can make dollars. Exchange rates are set by the market, but the interest rate is a decision made in a boardroom. Money is not a commodity, like other commodities. It's price (interest rates) is not determined by supply and demand. It's determined by monopoly price setting. Pegged currencies work the opposite way. CBs set the exchange rate, but they can't control interest rates. You could make the argument that the "price of money" is represented by exchange rates in the former, interest rates in the latter. But semantics aside, I think it's important to start with a recognition that CBs set interest rates as they see fit in most major currency markets today. Fed interest rates are not market determined. This is also (a not unrelated) thing that has changed since 1980. There was also a shift from pegged and semi-pegged currencies to floating exchange rates. Second, interest rates are not the actual return on savings in most cases. Most "savings" are in assets. Pension portfolios, private wealth funds, real estate, etc. These are the returns that "justify forgoing consumption," not interest rates. Returns on such investments have been high in recent years. CB interest rates translate relatively directly into the cost of borrowing, and the cost of repaying old debts. Interest rates do not determine the return on savings. Third, and this is where Thomas Picketty makes his controversial points... there is not much give in the "money now vs money later" market. For the most part, ordinary people spend their income. Wealthy people save/invest their money. When wages rise, the volume or price of goods may rise. When investment returns rise, the value of assets rise and inequality is increased. Regardless of profits, losses, taxes or such, Bezos' lifestyle will not change. Only the value of his assets will change. At the extreme end, poor people spend all their money and have no assets. Rich people save all their money and have negligible spending. The fact that market returns, the real "savings rate" have been high has not, on average, encouraged middle class guy to save more. That said, if you aren't already, you may interested in Hayek. His most famous work is all about interest rates as prices, and choosing between money now and money later. I disagree, at least in regards to 2021, but he was a clear writer and worth looking up.
- quotemstr 5y ago
zehaeva 5y ago
This is pretty similar to what Thomas Piketty says in Capital in the 21st Century
resoluteteeth 5y ago
> The middle class guy making $75k If one person is making 75k they aren't middle class. 75k might not go very far with kids but in that case their spouse would also likely be working so the household income would be significantly higher than that. Edit: To be clear, the actual definition of middle class income is much lower as well: https://www.cnbc.com/2021/07/21/middle-class-calculator.html https://www.cnbc.com/2021/07/21/middle-class-calculator.html > That puts the base salary to be in the middle class just shy of $46,000. I'm guessing I am getting voted down because a lot of people here think it's difficult to live on 75k, but the reality is that a huge percentage of americans are living on even less, so the difficulty of getting by with kids on 75k doesn't really affect whether an individual making 75k is considered middle class or not.
- paulpauper 5y ago
  Yeah, it's easy to underestimate just how little money most Americans make when you're in your 'bubble'. Something like only 30% of Americans have a college degree. the other 70% are likely going to be in that sub-45k bracket.
- treebot 5y ago
  I don't think it matters if $75k is middle class or not. It's definitely not ultra rich, as was the other example person in the original comment, so the argument still applies. Middle class is kind of an arbitrary term though. I think working class describes things much more clearly (I work for an employer for a living). And there are plenty of working class people making $75k a year.
MR4D 5y ago
> But what about the guy worth $100 million? Question - which guy with $100million - the one with it all in cash, or the one who owns a company that is “worth” $100million ? Those are two very different people.
- bedhead 5y ago
  No, it's the same. He created $100 million for himself that might have otherwise be spread out amongst employees, suppliers, investors, etc, who would've used their "share" of the $100 million for consumption and savings, with higher marginal costs of saving. Whether it's cash or equity is irrelevant because money is fungible...he's just skipping the step of converting it to cash and saving/reinvesting it.
missedthecue 5y ago
It's a pool of capital, but it's not a fixed pool. It's not as if my house or 401k going up in value makes someone else's go down.

gatkinso 5y ago

Fascinating comment

giantg2 5y ago

"Money also has diminishing marginal utility, so as you accumulate more of it, at some point it has less use." Thats true assuming the same scope, like living expenses. It gets a little more nuanced if the person changes the activities in scope. If you're giving billions away in a philanthropic organization that you run (ie Gates), then you've found new utility for that money. So in some ways it has more possible uses, but less pressure to actually use it. But I think your implied point of limited choices for people with lower income/capital is still valid.

whimsicalism 5y ago
It's unequivocally true, diminishing marginal utility of money is basically an axiom.
- giantg2 5y ago
  If it's unequivocally true, how about a source that shows scope does not impact it? I'm simply stating that money does not have fewer uses as one gets more of it. Usually the person's scope changes to include new uses that were not previously possible. The important thing to note is that utility is being used in mixed definition here. Strictly speaking it's definition is happiness or satisfaction. The part about having less use doesn't necessarily match this.
  - deleted 5y ago
    [deleted]
  - nonameiguess 5y ago
    Diminishing marginal utility is an axiom over fixed magnitude amounts of a good. Bill Gates still gets less out of an additional $10 even with new opportunities for philanthropy than a panhandler who is hours from starving to death and currently has $0. "Diminishing" doesn't mean it has to go to zero, but Bill Gates is not going to be in any situation where some number of dollars given to him on top of what he has means the difference between life and death. Heck, this exact fact is the very reason why Bill Gates engages in philanthropy. He realizes that other people need the money more than he does.
    - giantg2 5y ago
      Yes, but that wasn't what was explained. "Money also has diminishing marginal utility, so as you accumulate more of it, at some point it has less use." The additional money does not have less use. It's just not going to add as much to quality of life or dictate "life and death". There are still many uses for it, so of which may not be possible with lower amounts.

kiba 5y ago

Eh. Part of the reason is that living in the US is just plain expensive. According to statistics on average American household budget, 16% goes to housing. 14% goes to transportation.[1] So you can say that 30% of your consumption goes directly to land use, because cars need infrastructure and because we refuse high density housing and increased barrier for new housing supply. Taxes, which is 12%, actually comes a distant second. Also, with 75K, sounds like you would have ample amount to invest. 1. https://www.valuepenguin.com/average-household-budget https://www.valuepenguin.com/average-household-budget

lotsofpulp 5y ago
$75k household income with kids is a pittance in pretty much all areas of the US that have seen economic growth in the past few decades. Most people are simply skipping saving/investing sufficient funds for their old age/emergencies (a few million by 65, but I would say you need decent portion by 50 since likelihood of being unable to work starts going up a lot).
- Miner49er 5y ago
  This is part of the reason birth rates are down.
  - lumost 5y ago
    per the article's central thesis. If Income inequality changes direction births will rise.
    - toomuchtodo 5y ago
      Unlikely. Educated, empowered women with access to family planning facilities have less children if they have any children at all. Birth rates in developed countries with more robust social safety nets and less inequality have total fertility rates below that of the US. https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have https://ourworldindata.org/fertility-rate#what-explains-the-...

nightski 5y ago

I'm not sure I agree with this. "Interest rates" in terms of savings rates are typically below inflation. The wealthy guy and the middle class guy are not going to do well keeping their money in a savings account. Both have to find better ways to allocate their money and take on a little risk. Whether that is investing in a business, stocks, real estate, whatever is a better option at that time. Low interest rates actually give middle class guy more opportunity because it becomes cheaper to borrow. You can use leverage to increase your position. The most common form of this is a mortgage, but there are many other ways to utilize debt properly as well. I'm far from an economics expert, pretty novice actually. So I am probably wrong. But as a guy who came from a lower middle class household and has utilized debt & investments to change that significantly I feel like low interest rates have been a huge part of that.

whimsicalism 5y ago
It really is hard to say whether it is better or worse for the "middle class guy." Sure, it makes debt more accessible and also makes debt faster to wipe out due to inflation, but low interest rates typically increase asset prices (everything else being equal, which it usually isn't) and assets are primarily owned by the wealthy.
lotsofpulp 5y ago
> Low interest rates actually give middle class guy more opportunity because it becomes cheaper to borrow. You can use leverage to increase your position. The most common form of this is a mortgage, but there are many other ways to utilize debt properly as well. It is the same for everyone else, hence assets get more expensive. It washes out, unless you make riskier and riskier bets to stay ahead of the curve. Some will win, but most will lose.
- nipponese 5y ago
  But for the poor, a 2x in cost of milk isn’t as burdensome when there’s a 1.2x in hourly wage. Plus, the cost of borrowing to buy that new car went down. Even though I hate this current inflation in ALL non-cash assets, it’s been generally positive for the poor, in the short-term, anyway.

whimsicalism 5y ago

I think it's not a bad analysis, but entirely absent from your story is the Central Bank and I really don't think that can be absent from discussions of rates. By far the biggest supplier of credit are banks, not private individuals - and their supply is effectively dictated by the Fed.

bedhead 5y ago
The Fed is reactive. The Fed doesn't set interest rates, the market does. I believe this is one of the biggest misconceptions about our central bank. Yes, the Fed plays an obvious role, more to do with printing money for whatever the issue-of-the-day is, but the market is far more powerful than the Fed when it comes to interest rates. If the Fed raised rates 500bps tomorrow, over time, interest rates would still settle back at 0%, and all the Fed would've done is created complete dysfunction. Central banks are reactive.
- dragonwriter 5y ago
  > The Fed doesn't set interest rates, the market does. The Fed sets interest rate targets, and the intervenes, maasively if necessary, in the market to acheive them. > If the Fed raised rates 500bps tomorrow, over time, interest rates would still settle back at 0% The only reason rates are near zero is that the Fed has set its rate target near zero and intervened massively in the market to attain that target. If the Fed raised its rate target and kept it higher, rates would rise and stay higher. When the Fed target, was higher (most of the Fed’s history), interest rates remained higher. The Fed doesn't set its targets based on what it thinks the market would do without intervention, but based on what it thinks needs to happen to achieve its balance of employment and price stability objectives. > Central banks are reactive. You bracket your post, beginning and end with it, but you don't seem to understand that all it means is that Central Bank action goals respond to observed conditions. You act as if it means the Central Bank is impotent to affect conditions, and in particular interest rates, which is clearly false.
  - chii 5y ago
    > [Feds] intervenes, maasively if necessary The Feds have some scope to nudge the interest rate, but they cannot massively change it against the market. The persistent low rates of the past 2 decades are mostly market driven, because there's been a lack of growth. The feds try to nudge lower the rates past the "natural" rate (a rate as if they weren't there), but the trend of the rates being down isn't determined by the Feds.

bluecalm 5y ago

Not sure how high interest rates mean better return from investment. I mean look at the chart from last two decades or so. If by investment you you mean giving money to the bank so the bank can loan it to other people then obviously the investment will be paid by people who need loans which is, you know, not exactly good for lower/middle class. I for one think near zero interest rates are optimal. As o long as we can ensure there isn't too much irresponsible lending. Liquidity is very important and ensuring people who can make use of the money have easy access to it is very important.

danielschonfeld 5y ago

I don't think you have explained the reason for the capital accumulating more at the one side of the margin. Or maybe I just didn't understand?

bedhead 5y ago
Excellent question. I believe technology is the primary culprit. Think of something like WhatsApp, which Facebook bought for about $20 billion and would be worth who-knows-how-much today. I think WhatsApp had like 70 employees, a couple founders, only took a small amount of capital, and yet created $20 billion of value in a company in just a few years. Go back a couple decades when technology couldn't scale like it can today, what would it take to create a $20 billion company? How many years, how many employees, how many suppliers, how many customers, how much capital, etc etc. Instead, it was like three guys who each made $7 billion or whatever. This word "scale" is really just code for concentration, as in, a company can grow without having to spread the wealth around, it can instead accumulate to a relatively small group of highly intelligent and creative people. Technology enables that top echelon of people to keep more for themselves. So, I would say technology in a general sense is really what's driving wealth concentration. The long-term persistency of declining rates and increasing wealth concentration tell us it has to be structural, and I'm not sure what else can explain it. But, people are often uncomfortable with this, because it's not fixable. High taxes don't fix it over time, because we can keep replaying that game over and over again and the smartest will just keep winning and amassing a disproportionate share of the wealth created.

dalbasal 5y ago

I can see the logic of this statement, and it is in line with a lot of economic thinking... but I disagree with the jist. First, the "price of money," is not set by markets if by "price of money" we mean interest rates. Interest rates are set by a central bank, which is a monopoly. IE, only the ECB can make euros. Only the Fed can make dollars. Exchange rates are set by the market, but the interest rate is a decision made in a boardroom. Money is not a commodity, like other commodities. It's price (interest rates) is not determined by supply and demand. It's determined by monopoly price setting. Pegged currencies work the opposite way. CBs set the exchange rate, but they can't control interest rates. You could make the argument that the "price of money" is represented by exchange rates in the former, interest rates in the latter. But semantics aside, I think it's important to start with a recognition that CBs set interest rates as they see fit in most major currency markets today. Fed interest rates are not market determined. This is also (a not unrelated) thing that has changed since 1980. There was also a shift from pegged and semi-pegged currencies to floating exchange rates. Second, interest rates are not the actual return on savings in most cases. Most "savings" are in assets. Pension portfolios, private wealth funds, real estate, etc. These are the returns that "justify forgoing consumption," not interest rates. Returns on such investments have been high in recent years. CB interest rates translate relatively directly into the cost of borrowing, and the cost of repaying old debts. Interest rates do not determine the return on savings. Third, and this is where Thomas Picketty makes his controversial points... there is not much give in the "money now vs money later" market. For the most part, ordinary people spend their income. Wealthy people save/invest their money. When wages rise, the volume or price of goods may rise. When investment returns rise, the value of assets rise and inequality is increased. Regardless of profits, losses, taxes or such, Bezos' lifestyle will not change. Only the value of his assets will change. At the extreme end, poor people spend all their money and have no assets. Rich people save all their money and have negligible spending. The fact that market returns, the real "savings rate" have been high has not, on average, encouraged middle class guy to save more. That said, if you aren't already, you may interested in Hayek. His most famous work is all about interest rates as prices, and choosing between money now and money later. I disagree, at least in regards to 2021, but he was a clear writer and worth looking up.

quotemstr 5y ago

zehaeva 5y ago

This is pretty similar to what Thomas Piketty says in Capital in the 21st Century

resoluteteeth 5y ago

> The middle class guy making $75k If one person is making 75k they aren't middle class. 75k might not go very far with kids but in that case their spouse would also likely be working so the household income would be significantly higher than that. Edit: To be clear, the actual definition of middle class income is much lower as well: https://www.cnbc.com/2021/07/21/middle-class-calculator.html https://www.cnbc.com/2021/07/21/middle-class-calculator.html > That puts the base salary to be in the middle class just shy of $46,000. I'm guessing I am getting voted down because a lot of people here think it's difficult to live on 75k, but the reality is that a huge percentage of americans are living on even less, so the difficulty of getting by with kids on 75k doesn't really affect whether an individual making 75k is considered middle class or not.

paulpauper 5y ago
Yeah, it's easy to underestimate just how little money most Americans make when you're in your 'bubble'. Something like only 30% of Americans have a college degree. the other 70% are likely going to be in that sub-45k bracket.
treebot 5y ago
I don't think it matters if $75k is middle class or not. It's definitely not ultra rich, as was the other example person in the original comment, so the argument still applies. Middle class is kind of an arbitrary term though. I think working class describes things much more clearly (I work for an employer for a living). And there are plenty of working class people making $75k a year.

MR4D 5y ago

> But what about the guy worth $100 million? Question - which guy with $100million - the one with it all in cash, or the one who owns a company that is “worth” $100million ? Those are two very different people.

bedhead 5y ago
No, it's the same. He created $100 million for himself that might have otherwise be spread out amongst employees, suppliers, investors, etc, who would've used their "share" of the $100 million for consumption and savings, with higher marginal costs of saving. Whether it's cash or equity is irrelevant because money is fungible...he's just skipping the step of converting it to cash and saving/reinvesting it.

missedthecue 5y ago

It's a pool of capital, but it's not a fixed pool. It's not as if my house or 401k going up in value makes someone else's go down.