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Originally Posted by heep223
You're making an assumption that by having wealth you're going to generate more wealth. There is also a huge risk associated here, do you wonder how much Edwards has lost over the last 2 years? A staggering amount.
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Thomas Piketty offers some pretty convincing evidence that the bigger the pile of capital you have the more likely and faster it is to grow. From
the review of his book "Capital in the Twenty-First Century" in the Harvard Business Review:
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Capital (which by Piketty’s definition is pretty much the same thing as wealth) has tended over time to grow faster than the overall economy. Income from capital is invariably much less evenly distributed than labor income. Together these amount to a powerful force for increasing inequality...
Over the two-plus centuries for which good records exist, the only major decline in capital’s economic share and in economic inequality was the result of World Wars I and II, which destroyed lots of capital and brought much higher taxes in the U.S. and Europe. This period of capital destruction was followed by a spectacular run of economic growth. Now, after decades of peace, slowing growth, and declining tax rates, capital and inequality are on the rise all over the developed world, and it’s not clear what if anything will alter that trajectory in the decades to come...
Piketty’s main worry seems to be that growing wealth in Europe will bring a return to 19th century circumstances in which most affluent people get that way through inheritance...
But the basic message from Piketty’s data, that the ravages of the World Wars and the high taxes that followed put a big damper on wealth and inheritance that has now been lifted, seems irrefutable. His assumption that most of these heirs and heiresses won’t squander their fortunes can of course be questioned, but he does offer evidence for his contention that the bigger the fortune, the faster it will grow in the future: the performance of university endowments in the U.S., where the largest endowments have earned dramatically higher percentage returns than the rest...
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