The endless spiral: why the poor always get poorer and the rich get richer

The ever-topical topic of poverty and wealth is again explored on the Russian Futurist channel by the analyst Oleg Kalistratov:

The spiral of poverty and the spiral of wealth

“The question that worries everyone: why almost always the rich get richer and the poor get poorer? This trend has clearly manifested itself during the current pandemic and the economic crisis, which multiplied the fortunes of the richest people on the planet. The answer is as simple as it is harsh: poor people are in a weak position and are forced to enter into economic relations of any kind on unfavorable terms. This provokes further plunge into poverty. The rich, on the other hand, have the opportunity to carry out economic transactions when and on such terms when and how it is beneficial for them - which increases wealth.

How it looks in practice. If your income does not cover basic needs - there is no opportunity to buy food, clothing, furniture, household appliances, rent as needed - you most likely constantly take consumer loans or use credit cards. Obviously, in this case, you sign up in advance for an unfavorable deal for yourself: you will have to give more than you took. Loans allow you to somehow make ends meet - until you are faced with unforeseen expenses (hello from a pandemic with the need for paid treatment in some cases) or reduced income (hello from lockdowns). What happens in such a situation is well known to everyone who has gone through this - you are trying to borrow money from friends, but they also do not have money, because at that very moment everyone is in exactly the same position. Then there are microloans at horse interest, pawnshops where you rent electronics recently bought on credit at bargain prices, in the worst case, it comes to the sale of housing - again at a disadvantageous price because you have to sell urgently. Good advice: as long as the amount of debts allows, it is better to honestly file for personal bankruptcy - many are shy, but in fact there is nothing wrong with that.

The story I have described is called the spiral of poverty. Eternal debts and the habit of living one day, because tomorrow may be even worse, become a way of life and are passed on to the next generation. It is extremely difficult to get out of the vicious circle, even in the case of an increase in income - it requires extra effort.

Now the situation is completely different: you received a good inheritance or somehow saved up a couple of million dollars. You have more money than you need for running expenses. You are not too wasteful - that is, you have no desire to buy a yacht and fill its deck with coke, but you are not overly frugal either - you want to live as you please as far as your means allow. What are you likely to do in this case? Invest one million and you will live peacefully on the second. Let's say you inherited your inheritance 10 years ago and invested a million in one of the most obvious investment vehicles, the S&P 500. By 2021, your million has turned into four, and even if the second is spent, you now have twice as much money as you had in 2011-m. Let me emphasize: all this time you might not have been working, it was not even necessary to seriously understand investments - you had to invest once in a very simple and conservative instrument.

This is a spiral of wealth. You can fall out of it with an irrepressible appetite for risk or an excessive love of luxury - but if you are not different in both, once inside, you will most likely continue to get rich without even making much effort. Both wealth and poverty tend to unwind and gain momentum like an expanding spiral: like breeds like. Once inside such a space, you are more likely to remain in it than to be outside ... "

What will the new "select and divide" look like?

Commenting on this reasoning, journalist Pavel Pryanikov makes a far-reaching forecast:

“The author correctly describes the“ poverty trap ”and the“ wealth trap”.

In addition to East Asia - especially China, while they are developing catching up, but it will soon reach the "middle income trap" and stop - the world has been mothballed in these two traps. And if earlier there was a communicating vessel between the two worlds - the middle class - now it is getting thinner: the middle class is not growing, and in most developed countries it is even shrinking.

In developed countries, the classic scheme of capitalism is leaving: commodity-money-commodity. What remains is money-money. True capitalism C-D-C remained only in East Asia. The US has printed $ 4.8 trillion since March 2020. And the printing press does not stop now. On this paper, America incl. buys goods abroad, and money flows into the stock market. As Oleg correctly describes in his example, now you can invest in Tesla or Apple shares, and live simply on dividends and stock growth.

If earlier the capitalist would have invested this $ 1 million in T-D-T (in a factory, farm, store, etc.), now he is investing this $ 1 million in stocks (or in an even more growing market - in contemporary art , which over the past 20 years has overtaken the S $ P index by 175% on average); and even more profitable - bitcoin, this year it brought 65% profitability - compare with the average production profitability of 4-7% on average in the world, incl. here in Russia).

The world metropolis - the USA and the EU, which account for 85% of world reserves and settlements (60 + 25%) - now simply live on rent, and the periphery and semi-periphery (PIP) are working. On the same rent, the PIP elites, such as the higher authorities of Russia, live on, siphoning money from their countries to the metropolis. For us, they are the chiefs, and in the world table of ranks, they are the governors of the metropolis in the mandated territories.

New leftist economists led by Piketty and Zucman from the Paris School of Economics have long been saying that it is time to tax this whole world of derivatives, at least 1-3% for each transaction, the so-called. “Tobin's tax,” and this money should be used for infrastructure, education, and the development of human capital. Plus capital tax. “Historical data show that without state intervention, capital remains more profitable than development, even at the most rapid pace of progress. It is clear that tax policy is closely related to ideology (right-left), ”wrote Piketty. The world is already overripe to the left transition..."