Wealth and Capitalism
Wealth and Capitalism
Thought spark of the week from Gideon Rosenblatt.
Originally shared by Gideon Rosenblatt
Thomas Piketty conducted an in-depth analysis of wealth a few years ago. One of his key conclusions was that if investment returns average higher than economic growth over time, wealth disparity emerges.
Now a Federal Reserve Bank economist has run the numbers to see whether investments do outperform economic growth over the long haul. The short answer? Yes, they double it.
Think about it in concrete terms. If person A buys investments that grow twice as fast as the economic growth rate to which person B's wages are ultimately pegged, A's wealth will eventually snowball, leaving B in the dust.
“The weighted rate of return on capital was twice as high as the growth rate in the past 150 years,” the authors conclude.
...if you were a typical investor and you wanted to buy a representative chunk of the wealthy world's economy, you could expect an annual rate of return of about 6.28 percent.
Overall, if the average annual return on wealth since 1870 has been 6.28 percent, average annual economic growth works out to just 2.87 percent.
https://www.washingtonpost.com/news/wonk/wp/2018/01/04/massive-new-data-set-suggests-inequality-is-about-to-get-even-worse/?utm_term=.1fa7b7d24211
Thought spark of the week from Gideon Rosenblatt.
Originally shared by Gideon Rosenblatt
Thomas Piketty conducted an in-depth analysis of wealth a few years ago. One of his key conclusions was that if investment returns average higher than economic growth over time, wealth disparity emerges.
Now a Federal Reserve Bank economist has run the numbers to see whether investments do outperform economic growth over the long haul. The short answer? Yes, they double it.
Think about it in concrete terms. If person A buys investments that grow twice as fast as the economic growth rate to which person B's wages are ultimately pegged, A's wealth will eventually snowball, leaving B in the dust.
“The weighted rate of return on capital was twice as high as the growth rate in the past 150 years,” the authors conclude.
...if you were a typical investor and you wanted to buy a representative chunk of the wealthy world's economy, you could expect an annual rate of return of about 6.28 percent.
Overall, if the average annual return on wealth since 1870 has been 6.28 percent, average annual economic growth works out to just 2.87 percent.
https://www.washingtonpost.com/news/wonk/wp/2018/01/04/massive-new-data-set-suggests-inequality-is-about-to-get-even-worse/?utm_term=.1fa7b7d24211
Thanks, Zara Altair. Sobering stuff...
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