Unless they've sacked their money away under their mattress, it has been deployed back into the economy. It is either invested or in a bank where the majority of it has grown the pie of total dollars through loans (this is often not well understood). If I have ten dollars that I place in a bank, they will only hold the required reserve. Assuming this is 30%, then seven will get distributed in loans. The effective size of the money is now 17 dollars.
No, this is actually wrong. While they can do this, they don't in practice because of competing banks. If that 33.33 dollar check goes into a competing bank, that competing bank, by virtue of being a rival/competitor, is going to immediately go back to the lending bank and demand the IOU in cash. If the lending bank has only $10 in reserve then they can't pay back the $33.33. So instead, due to necessity, the bank will only lend out $7.
What you are describing is fractional reserve banking under a SINGLE or central bank. The United States Federal Reserve does this kind of lending to commercial banks deliberately to control the money supply. Actually, I'm not even sure if the federal reserve is required to maintain a reserve ratio (of federal notes to cash) at all. I think those federal reserve notes are literally created out of thin air.
Yes. This is true. I mean wealth in terms of wealth ownership. Compounding interest from loans, dividends, or stock investments causes the amount of wealth "owned" by rich people to grow unnaturally.
There's nothing unnatural about yielding a return on an investment.
The greatest contributor to wealth inequality in the last 40 years is the Federal Reserve debasing the currency that the middle class depends on (and since ~1970, they've been doing it at a very rapid clip). If your wages go up 2% per year, and inflation averages 3% per year, over 30 years your standard of living is going to get nuked. The super rich can manage inflation by shifting assets, everyone else cannot.
In the natural state of things, one does work and in doing work one gains roughly equal wealth in exchange for an equal amount of work.
Yielding compounding returns on investments with little risk is gaining wealth for no work. That is unnatural.
What is more unnatural is when an obscenely rich person earns a million a year as a return on investments. A million dollars in wealth in one year is usually not equivalent to the output of one man. Multiple people must work together to generate that amount of GDP. So how does a rich man procure the wealth equivalent to the work of multitudes of people without contributing any work himself? He must do so in a way that is unnatural.
