Extra Credit
PAYAM FAKERI
I will like to prove my idea and agree with Piketty’s idea that the riches get richer and poor get poorer, particularly in a bad recession. My focus of my statement will be based on United States market; As we all know US economy is based of capitalism system; That means there are lots of money available thought wealthy major capital holders that they are not even more than 10% of the population of the US. Picketty's premise is that capitalism has a natural drift toward income inequality because assets like stock and real estate tend to grow in value faster than the economy as a whole. Piketty’s inequality theory is based on a formula he calls “R > G,” meaning that the return on capital wealth exceeds the rate of economic growth.
In support to my idea R>G; I would like to discuss this idea which I do agree with him in a real recent world economic crises that effect most middle class people in united states. We know that any small changes in economy or even in individual people’s life can jeopardize their routine’s life in order to handles their cost of living, mortgage, bills or any relevant fix or variable costs. By saying that; most Americans living with debt (high ration debt Approximant 26% of the population) and they live paycheck by paycheck on their routines life. In the event I help, they go and find a rich (Investors – Bank or other intuition) to borrow money at any APR.
The following examples will support my agreement:
Real Estate and Properties: During the economic crises; lots of home owners face problem to make their home mortgage payment; property taxes and other relevant household expenses; the value of the house fallen down; investors get this opportunity to buy the house at the very low price from them, home owners had no other choose to do it. Therefore; the investors will buy it and keep the property and sell then when the right time is, SO THEY GET RICHER.
Another example; middle classes people whose lost their jobs, homes – they rely on the credit cards, other savings, credit lines that they have; therefore; they will use the money or credit line that (capital) have in order to sacrificed for the short period of time, therefore ; it damage their credit score since the debt ratio goes high more than 40% besides the high interest rate they are paying; most cases people only pay minimum required payment and not even interest and principle money; So capital ( investors) will come get the higher interest rates; again They get richer.
In a recent economy crises; they are many companies ( investors ) that they are rich and have capital; they try to offer a loan at the very fast way if someone needs CASH; by having then sign a contract with the interest rate of 112% against their vehicle ( title loan). So investors get richer and poor people that ding to have $2000 cash get poorer.
It can be even related to taxes – Richer get richer, pay less but regular person pays more, because rich can hire a CPA or go to professional accounting firm at the higher rate per hour or case but and middle class person just go to ordinary places to file his tax and probably ending up to pay more taxes.
In general; the riches in this case (Person holding capital) has always have more investment opportunity, more chance to get the high line of credit, loans at the very reasonable rates from other investors, banks or lenders and the reason is they are strong, low debt ratio and more supportive financial statements while a poor person won’t have any of those opportunities.