[saticmotion]

Another fact, that recently struck me, also seems to make inequality larger. I'm not quite sure how to put it into words, but I'll try.

If we take an average middle class family and a rich family. Both want to build or buy a house. Let's suppose the houses they want cost the same, e.g. $200.000. The rich family pays $200.000 and is done. The middle class family however, will have to take a loan of, let's say, 20 years at 4%. This family will eventually pay almost $300.000 for that same house.

So because the rich family can buy things without loaning, they actually pay less. This might seem obvious to some, or most of you, but it still strikes me as "unfair" (though it's perfectly fair that you pay interest on a loan).

[jeremysmyth]

You're ignoring the opportunity cost of not keeping that $200,000 in the "rich family's" deposit account or asset portfolio. If I buy something to use for $200k, I can't invest that same amount to convert it to $300k (assuming the same 20 years @ 4%), so I effectively lose 100k over the same period for the same reason. While they're certainly not equivalent, they're closer than you suggest.

[d4vlx]

Houses typically appreciate at better than 4% a year over 20 year time frames, although this is very location dependent. If they had bought in almost any city in the US with a population over a million they could have done much better.

http://www.census.gov/const/uspriceann.pdf