I’m not exaggerating that much, this is pretty concise / complete:
The key insight is that the ultra-rich are different from you and me: they have much higher saving rates regardless of their age. No matter how expensive your tastes, there’s a limit to how much you can consume, which means any income above that threshold has to get saved. The ultra-rich therefore spend relatively small shares of their income on goods and services that directly provide jobs and incomes to others, instead accumulating stocks, bonds, art, trophy real estate, and other assets.
The ultra-rich need no encouragement to refrain from buying goods and services, so any increase in income concentration should put downward pressure on interest rates. Another way to look at it is that an increase in income concentration boosts the demand for financial assets, which should push up prices and push down yields.
That’s from Matthew Klein’s excellent The Overshoot substack, addressing the driving force behind virtually everything happening right now in the economy and markets.
He looks at some recent research that ties together demographic change (we’re on our way to a world with 30% less children by 2100), declining interest rates and wealth inequality. This is fascinating stuff and Matthew is a really good explainer.
He posted this one for free, I highly suggest you read it:
Inequality, Interest Rates, Aging, and the Role of Central Banks (The Overshoot)