Income Inequality and Wealth Transfer Simplified

Let's begin with the catchphrase, "The rich gets richer and the poor gets poorer." We all hear this at some point or another, but never really took the time to understand why. In basic economics, it is referred to as 'Income Inequality', a widening gap in wealth between the rich and poor. Today's world, it is caused by the transfer of wealth from the poor to the rich. To solve a problem such as this, we must identify the root cause by going to the fundamentals of money creation.

Money Creation via Currency

Imagine a scenario when money must first be created. First, the money printer prints $200, and gives it to 2 people. They both hold $100 each, which they both hold 50% of the money supply. The $100 bill is quite valuable as it is only 1 of 2 in the entire world. They both use it to trade for goods and services from each other.

Transfer of Wealth via Money Creation

The money printer creates $100 and gives it to Person A. This time Person A holds 2/3rd of the money supply! Suddenly, that $100 that was worth 50% is now worth 33.33%. Person B is now at a disadvantage, since he only holds 1/3rd. The creation of a $100 dilutes the value in terms of basic 'supply-and-demand'. Person A is now richer because he was the recipient of the extra $100.

Income Inequality via Transfer of Wealth

Person A sees the benefits of transferring wealth from Person B, and asks for money from the Money Printer. There is now $400 in existence, and Person A holds $300 ( 75%) of the wealth. Person B is still holding the same $100, but it is only worth 25%. By continuing to dilute the money supply, the gap in wealth continues to widen.

Real Life Scenario Comparison

The story sounds ridiculous but this is essentially what is occurring in the world. Each country has a Central Bank that creates new money and charges interest. The interest payment goes to the owners of the Central Bank. The more money the Central Bank creates, the more interest payment they get. Private Banks benefit from this as well as they are the recipient of the printed money. This is simply a wealth transfer by dilution of the money supply. Those that are able to gain easy access are the ones that benefit. A scheme such as this is only possible when government mandates it, and the people accepts it.

Real Life Solution

The only solution is to replace the current monetary system that is not inflationary by design. There are no exceptions. It is a system rigged to benefit those that are in control of the monetary system.