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this post was submitted on 09 Apr 2024
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What does fairness have to do with it? Compound interest is just math.
One could trivially make an argument that we should redistribute the wealth among the population, but there is not a clear way how to do this effectively, or it would have been done already.
The hard part is taking on the appropriate amount of risk in order to actualize those gains; a bank won’t just give you a 10% interest rate, you have to work your ass of for it. An entrepreneur needs to assess the landscape and invest in what the market will want tomorrow, and most people guess suboptimally (3-6%), or end up losing money, whether in fact (negative returns) or relative to inflation (0-3%).
Even pointing to the S&P 500, as most people do, you still need to make the conscious decision to sell and take profits, FOMO be damned. Or alternatively, taking a perceived loss but actual profit (e.g., you didn’t sell right at the peak, but that’s usually okay). It’s not easy, and most people don’t have the time or stomach for it; these people are best served by long term, government-backed bonds, after which you will come out only slightly ahead of inflation.
Using the rule of 72, and a 3% bond rate, it would actually take you 24 years to double your money, not seven. And that, my friend, is why you and I are not billionaires.
That is terrible reasoning. That would only be true if every idea ever come up with had been tried and no new ideas will come up.
UBI would be quite effective for many reasons. The reason it hasn't been done already has nothing to do with how effective it might be. And we know giving everyone money is effective, because Alaska does it with their oil dividends.
Another method that has definitely not been fully implemented is debt jubilees for people with more debt than assets to cover that debt (e.g. student debt forgiveness, medical debt forgiveness, etc.).
It’s not reasoning, or an argument for or against, it is just a statement. I’d admit that it’s probably a tautology.
What the post described is a taxation and societal problem, not a problem with investing or compound interest in general.
I’d easily agree that society is unfair, and that our taxation policies are directly antagonistic to the middle class, but again, this is simply math (and though it is theoretical, microeconomics).