[hifromwork]

>just put up some initial capital in exchange for even more money back, is always a scam. some people might come out ahead sometimes, but more people will lose than win.

How so? My all-world index funds are doing pretty well. For more risk averse, almost every buyer of USA governmental bonds gets "even more money back" in exchange for the initial capital. I don't think that's a scam either.

[khuey]

> For more risk averse, almost every buyer of USA governmental bonds gets "even more money back" in exchange for the initial capital.

In nominal terms, sure. In real terms, ask the banks that bought 30 year treasuries in Spring 2020 how that's going for them.

[ensignavenger]

The problem for some of those banks wasn't the 30 year treasuries, it was that they bought those treasuries with other peoples money, and other people did not commit to 30 years, so now when the other people come to get their money, the bank doesn't have it.

The 30 year treasuries are still doing just fine, in accordance to the terms of the treasury when it was bought.

[eru]

The treasury offers no fixed terms for inflation. It's a gamble.

[ac29]

Inflation adjusted bonds are a thing in the US (though at least with TIPS, the real return has occasionally been negative).

[schmidtleonard]

Every time you pay a profit margin, or pay taxes that cover bond interest, or pay inflated asset prices (real estate), you put money into the system. Every time your stocks, bonds, and real estate holdings go up, you receive money from the system. How good of a deal this is depends on how rich you are and how good you are at picking assets. And your luck at timing, of course.

The Fundamental Theorem of Capitalism -- on expectation, rich people get paid for being rich in proportion to how rich they are and how good they are at capital allocation -- is both great and terrible.

It's great in that it gets you skin-in-the-game capital allocation decisions. Everyone gains 50 IQ points when they have skin in the game and capitalism is how you leverage that to run a society. It's terrible in that it does tend to establish, reinforce, and perpetuate a class hierarchy where the people on the bottom must constantly pay to exist while the people on top constantly get paid to exist. It's great in that it maximizes the money available to accountably chase exciting new prospects. It's terrible in that it creates extraordinary incentives to enshrine old prospects whose time should have passed long ago. It's great in that it can democratize wealth and power away from a King or Party, but it's terrible in that it tends to concentrate wealth and power around the Wealthy. It's great in that damage of capital misallocation can generally be contained to the balance sheets of those most capable of bearing it, but it's terrible in that the wealthy and powerful have the means, motive, and opportunity to bend the entire system towards bailouts, monopolies, and asset-pumping.

It sucks, except for everything else we have tried. Shrug.

[rlayton2]

There is a risk, however small, that your bonds won't be paid back leading to a large loss.

[eru]

There's also the very real risk of bigger than expected inflation.

[xmprt]

It's not a scam for you but rather a scam for society at large. Making money purely by owning some revenue generating asset, while not providing any service yourself is doesn't work if every single person does it. Many people who work at companies on the S&P500 aren't paid enough to having savings to invest. The money the company saves on employee salaries are shown as profits which result in the "passive income" that you're making.

I don't 100% agree with the logic because it doesn't account for improvements in productivity but I think it roughly translates especially in some late stage capitalism cases where company profits grow despite lower productivity (eg. layoffs).

[bulletsvshumans]

Perhaps those who aren’t the investors benefit by being invested in, indirectly. They are benefitting from a government running on money from bonds, and possibly employed by a business fueled by some form of debt.

[eru]

Why does the evil conspiracy that's exploiting those poor workers let nobodies like me (and presumably you) buy shares that let us participate on equal terms in their profits?

The aristocrats of old never felt the need to share the wealth like that, did they?

[shnock]

Not everyone can buy USA bonds. Is the population of winners and losers all humanity?

[s1artibartfast]

The money that is used to buy the bonds goes to the government, and then into the pockets of the citizens.

The bond holders tend to be the tax prayers as well, so it is almost like a partial rebate.