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Yes, a point I was hinting at is that low volatility increases income inequality.
Let's say there are 2 sequences of annual returns that both have the same total return.
Sequence 1 is 10%, 10%, 10%, 10%, 10%.
Sequence 2 is 40%, -70%, 100%, 50%, 28%
The total return in both cases is 61%, but in sequence 1 leveraged investors will make huge returns, whereas in sequence 2 they will go to zero.
The current economic environment has been called "The Great Moderation". Combined with low interest rates it has allowed leveraged investors to make insane returns. I'll bring up again that TQQQ is up nearly 10,000% since 2010.
That is the #1 cause of wealth inequality increasing, definitely far more than any changes to tax policy.
leverage and the fact that large tech companies have gotten very good over the past decade at making huge profits and being at the center of economic activity and being unchallenged politically , like regulation. High interest rates does not hurt that much given that these companies are so dominant and have little or no debt, and that rising interest rates and inflation is more like a shifting of the y-axis than potentially costly for business. Advertisers bid higher on meta/Google ads, and those costs are passed down to consumers, who earn higher wages, etc.
It's not just the returns, it's the consistency of the returns that allows TQQQ to flourish. I'm not going to look up the prospectus again right now, but the returns of TQQQ vary massively by volatility. The lower the volatility, the greater the returns.
The elimination of the business cycle by the Federal Reserve and Keynesian stimulus have let leveraged speculators flourish.
This is one way in which low interest rates have contributed to excess return for TQQQ investors.
The other way is simply that low yielding bonds are such shitty investments that people chase returns and drive up the price of speculative investments such as QQQ, Bitcoin, wine, art, baseball cards, homes. Okay, pretty much everything.
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I got a solid lesson in this fact watching Crypto Markets over the past 7 years.
From an outside perspective, if you invested in Bitcoin when it was low, and held it, you've made out like a bandit, just insane wealth accumulation (assuming you cash in). But i would BET that the 'average' Bitcoiner (to say nothing of the average crypto-trader degen) either made minimal gains or even lost money over that time for the exact reason you say. They blew themselves up in a volatile market.
And I say this as someone who DID buy Bitcoin early in it's life, but cashed out before it hit recent ATH's to maneuver myself into a better-paying job because I got sick and tired of worrying that my primary source of net worth could drop by half (or more!) overnight.
So there are still a lot of insanely wealthy bitcoiners out there, but I bet the GINI coefficient rivals Brazil.
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