FEBRUARY 25
The Wealth Gap Machine
How Rising Assets Pull Owners and Savers Further Apart
The Signal
When scarce assets rise faster than wages and savings, ownership pulls one person forward while the other falls further behind.
The Reading
Picture two people at the same starting line. One already owns scarce assets. The other is still saving government-issued money to buy them. Some of the new money and credit flows towards property, shares, gold, land, businesses, collectibles and other scarce assets. Their prices increase in fiat over time.
For the owner, rising prices increase the value of what they hold. For the saver, the same rise raises the price of admission. That is the wealth gap machine.
Assets rise. Owners gain. Non-owners need more money to get in. They save longer trying to catch up, or they borrow more. If they borrow, interest claims part of their future income.
One person is being carried forward by ownership. The other is trying to catch up using money that is a melting ice cube.
Not every asset rises and not every owner wins. But when scarce and productive assets rise faster than wages and cash savings, the gap widens, often putting the saver in a position of hopelessness.
The doors to assets are not equally difficult to open. Property, land, private businesses and rare collectibles can require large amounts upfront. Other assets are highly divisible. Shares, small amounts of precious metals and digitally scarce assets such as Bitcoin can be accumulated in small pieces.
Being able to save in assets provides an escape hatch from the fiat world.
First Principles
Rising asset prices can increase wealth for owners while raising the entry price for non-owners.
Saving in money that loses purchasing power can make scarce assets harder to catch.
Divisibility lowers the barrier to beginning ownership.
Today’s Challenge
Choose one scarce asset you own and one you do not. Imagine both rise 10 per cent. One increases the value of what you already own. The other raises the price you must pay to get in.
Which side would you prefer to be on?
If you already own an asset, ask yourself: Would you rather keep building ownership of scarce and productive assets, or keep accumulating government-issued money that will continue losing purchasing power?
Tomorrow’s Signal
Incentives Change Behaviour