Wednesday, December 24, 2014

Piketty’s (unintended) advice for investors | Gavyn Davies

Piketty’s (unintended) advice for investors | Gavyn Davies: "Finally, though, let us circle back to the real rate of return on capital. Can it really stay indefinitely about 4 per cent, as Prof Piketty suggests, at a time when central banks are setting interest rates at zero, and when the growth rate, g, is slowing down? Boiled right down, he himself says that this is his central claim. But in modern textbook economic models, while the rate of return on capital can remain higher than g in the long term, it is likely to decline when g declines."

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