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I am not convinced the theories in that article are correct. One example: "The ultra-rich need no encouragement to refrain from buying goods and services, so a

I am not convinced the theories in that article are correct. One example: "The ultra-rich need no encouragement to refrain from buying goods and services, so any increase in income concentration should put downward pressure on interest rates. Another way to look at it is that an increase in income concentration boosts the demand for financial assets, which should push up prices and push down yields." Why should income inequality do that? What matters would be people's spending power, which is not necessarily correlated with income inequality - everybody could get richer, only some people could get a lot more richer, and it would still be income inequality. Also not sure how he calculates growth and demand. He argues there is less need to invest into the future because there are fewer young people. But don't older people have even more needs than younger people (their maintenance is more expensive, they need accessible housing, cars to drive them around and so on)? In my country (Germany) apparently they expect the demand for housing to rise, even though they expect fewer people, because they think people will live in increasingly smaller households (so more households with fewer people per household). Just some random examples.

zpeti 5y ago
Good point. Another issue is how many people outside the US have gotten disposable income over the last 50 years. Those people all can now invest some of their income, creating massive demand for investments. Like what robinhood did, but at a much larger scale. Which isn't anything to do with income inequality, in fact it's about how many many people have gotten richer in the world recently.
- Findeton 5y ago
  Income inequality is not the problem. Indeed everyone's purchasing power was way lower in the past and still people saved money. People save less money now, and that's one of the problems. Saving money does mean making the sacrifice of not spending it today, perhaps not even in the future. The other problem is called Central Banks. Central Banks need and force low interests, but then gov. debt is not attractive anymore (except for banks, which buy them with money freshly printed by the FED) and people chase higher returns in the general market. So investors end up fishing in equities, creating a bubble. The problem is that companies that consume a lot of physical resources, like Tesla, are pumped... while companies that dig those resources from the ground are not. In the end this increases scarcity and raw materials become more costly. This ends up driving prices up across the whole economy, it's inflation. Created by Central Banks. But of course when it happens many people will blame the free market.
  - imtringued 5y ago
    The deposit insurance programs shields you from risk in the market. 2008 introduced a lot of risk that wasn't passed on. So the reason why there is a shift toward taking on personal risk is that the moral hazard in the banking system introduced too much of it to the point that it requires negative rates.
- missedthecue 5y ago
  yes, I don't think folks appreciate how many people have made fortunes very recently. When Forbes first made their billionaire list in 1987, the counted 140 around the world. Today, there are 228 billionaires around the world with fortunes greater than $10 billion, and 1299 worth at least $2.4 billion, which is the current value of $1 billion 1987 dollars. Most of this is due to the explosion of capital markets, lower interest rates, and a huge part of the global economy freeing up. It's not because they made a bunch of other people worse off.
  - deleted 5y ago
    [deleted]
onlyrealcuzzo 5y ago
Kids don't generally own houses, and at one time they made up a sizeable portion of the German population. You can have a "shrinking" population, but still a growing adult population - and you would expect more demand for housing (and smaller household size) from this alone. German birthrates have been steadily declining for a long time. Declining birth rates and immigration (mostly to make up for that) probably plays as big a role on demand as family formation.

zpeti 5y ago

Good point. Another issue is how many people outside the US have gotten disposable income over the last 50 years. Those people all can now invest some of their income, creating massive demand for investments. Like what robinhood did, but at a much larger scale. Which isn't anything to do with income inequality, in fact it's about how many many people have gotten richer in the world recently.

Findeton 5y ago
Income inequality is not the problem. Indeed everyone's purchasing power was way lower in the past and still people saved money. People save less money now, and that's one of the problems. Saving money does mean making the sacrifice of not spending it today, perhaps not even in the future. The other problem is called Central Banks. Central Banks need and force low interests, but then gov. debt is not attractive anymore (except for banks, which buy them with money freshly printed by the FED) and people chase higher returns in the general market. So investors end up fishing in equities, creating a bubble. The problem is that companies that consume a lot of physical resources, like Tesla, are pumped... while companies that dig those resources from the ground are not. In the end this increases scarcity and raw materials become more costly. This ends up driving prices up across the whole economy, it's inflation. Created by Central Banks. But of course when it happens many people will blame the free market.
- imtringued 5y ago
  The deposit insurance programs shields you from risk in the market. 2008 introduced a lot of risk that wasn't passed on. So the reason why there is a shift toward taking on personal risk is that the moral hazard in the banking system introduced too much of it to the point that it requires negative rates.
missedthecue 5y ago
yes, I don't think folks appreciate how many people have made fortunes very recently. When Forbes first made their billionaire list in 1987, the counted 140 around the world. Today, there are 228 billionaires around the world with fortunes greater than $10 billion, and 1299 worth at least $2.4 billion, which is the current value of $1 billion 1987 dollars. Most of this is due to the explosion of capital markets, lower interest rates, and a huge part of the global economy freeing up. It's not because they made a bunch of other people worse off.
- deleted 5y ago
  [deleted]

onlyrealcuzzo 5y ago

Kids don't generally own houses, and at one time they made up a sizeable portion of the German population. You can have a "shrinking" population, but still a growing adult population - and you would expect more demand for housing (and smaller household size) from this alone. German birthrates have been steadily declining for a long time. Declining birth rates and immigration (mostly to make up for that) probably plays as big a role on demand as family formation.