Why Invest In Gold

 Picketty desribes how unevenly capital is distributed, especially in the developed societies. Typically, half of the population owns nothing, while the top ten per cent has about half of the wealth. For Picketty, capital means fixed assets that could potentially be traded, whose ownership can be bought and sold. It includes fixed assets, property, equity or cash, and excludes all forms of human capital, 

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which may be an asset and may have value, but, he argues, its ownership can only be traded in slave societies, which now do not exist. He considers capital distribution and income distributions separately, however, so at least an element of human capital is represented in the latter. He observes that income is always more evenly distributed than fixed capital, with the top ten per cent receiving just 25 to 30 per cent of total incomes. As a consequence, if there has been any shift in the identity of the capital-owning elite in recent decades, then this has come about at least in large part as a result of the very highly remuneration available to certain professions at the very top of the income ladder. The phenomenon has also resulted in an increase in inequality observed in developed societies during recent decades, especially in the USA and United Kingdom. Inequality continues to increase.

One of Picketty's fundamental laws is that capital always grows faster than the wider economy. Thus success via earning power inevitably leads to a graduation into the rentier class, a transformation that is needed if newly acquired status is to be consolidated. Furthermore, if the inequality stating that capital growth is greater than economic growth holds true, it implies that even the advantages of growth in the general economy will also eventually accrue to the owners of capital.

Historically, economic growth has been strongly associated with increasing population. Without the demographic element, economies have consistently attained no more than around two per cent growth. Two per cent is still a significant rate if maintained. But spurts in growth come with spurts in population. The opposite is also likely to be true, which in itself allows some facets of the current world economy to be seen in more informative light. Population surges produce economic surges, however, and this comes as no surprise. What does surprise a little is Picketty's assertion, perhaps assumption, that since France experienced population growth before other developed societies, then we must all look to France as the setter of the international economic agenda, the historic standard, if you like, that others followed.

Another historical reality that shows up very clearly in his data is the effect of foreign earnings throughout the nineteenth century and through World War One. These "invisibles", as they have sometimes been labelled, were simply the profits from colonialism and slavery. They financed deficits, borrowing and consumption at the heart of the empires from which they were drawn. In the modern world, he points out, there is perhaps a greater degree of foreign ownership of capital than ever before, but the benefits and capital transfers are two-way, as are the benefits, and thus net transfers are small.