How Many Times Have You Heard Someone Say? The Statement, “The Poor are getting poorer and the Rich are getting richer.”

I am sure you heard that before, but what they do not tell you is why that is happening. What are the mechanisms causing this phenomena.

So I will explain that to you here. What happens is that the investments that the Rich Person can afford will take advantage of inflation. So that the inflated price of the asset; however, those higher priced assets become much more difficult for the poor person to afford.

Now a basic explanation of inflation is in order. To give you a layman’s explanation: Lets say that you have a large pot of soup, and in it you have chicken, celery, carrots and various other vegetables. At the beginning the soup is very nourishing. But now since you are sharing it with many others so you add more water to the pot of soup, so you begin to have less of that powerful nourishing soup.

So you get the idea to add water to the pot, and now it looks like you have more additional soup. The problem is this soup with the added water is not as nourishing as the original soup originally was.

This may not be a perfect analogy, but you can get the Idea. A similar phenomenon happens with the money that we have.

The money we have gets printed and created in larger and larger amounts, and like the soup example, the money becomes weaker and can’t buy as much as what it once did. Now at first this doesn’t cause to much of a problem for those who got the money first since they are usually invested in things that can adjust for this loss of purchasing power. But for those who are poor in our societies the opposite happens with the inflation or loss of purchasing power.

The Fix

The only way to fix this situation is to have a new Monetary System, a system that actually helps the money to retain it’s purchasing power. For this to happen the money needs to be interchangeable with an asset who’s value either doesn’t vary or if the asset becomes harder to come by and thus more expensive, well then your dollars rise in value the same as the asset.

Under our current monetary system this is not the case. Those who have small amounts of money only see their purchasing power lowered as time goes by and they can’t catch up. It’s impossible for them because they don’t own those assets that I mentioned earlier that do keep up with the inflation rate.

You Can Begin to See the Dilemma

I have actually explained the problem to you and also given you the answer in this short article if you were paying attention. This is why the Rich get richer it’s because they invest in assets, they may buy gold, real-estate, companies etcetera. You may be wondering why would they buy companies? the reason for that is that most of these companies can adjust the pricing of their products to account for the inflation rate.

And the reason they buy assets is because as the inflation rises the price for these assets rises with it thus protecting them from the loss of purchasing power.