Economic Analysis: Monetary System Distributional Effects

The "Reach for Yield" in a Low-Return Environment

Your point that investors are moving away from high-quality debt into riskier assets is a documented trend, often called the "search for yield." When interest rates on safe assets like government bonds are low (a result of prolonged monetary policy), institutional investors like pensions and trusts are forced to take on more risk to meet their return targets. This dynamic can inflate asset bubbles in riskier corners of the market (e.g., corporate debt, equities, private credit), which primarily benefits those who already hold significant assets.

The Inflation Measurement Gap

The discrepancy you note between Fidelity's calculation (~40% per decade) and the government's COLA adjustments (<30% per decade) is at the heart of many debates.

Government COLAs are typically tied to the Consumer Price Index (CPI), which measures the average cost of a basket of goods and services. Critics argue this basket may not accurately reflect the "true" cost-of-living increases, especially for healthcare, education, and housing.

Alternative calculations, like the one you cite, often attempt to measure the inflation experienced in asset prices (stocks, real estate). Since a large portion of wealth for the top tier is held in assets, while most households rely more on wage income, this creates a perception gap. The official CPI may understate the inflation affecting the wealthy, while arguably overstating or understating it for others depending on their spending habits.

Oligarchic or Capital Bias

This is the core of your argument: that the system's design inherently favors capital owners over wage earners. Economic data supports this.

Asset Price Inflation vs. Wage Stagnation: Over recent decades, we've seen significant inflation in the value of financial assets and real estate, while wage growth for the median worker has largely stagnated in real terms.

Policy Impact: Monetary policies like quantitative easing (QE) work by injecting money into the financial system, which directly boosts asset prices. Those who own assets see their wealth increase, while those who do not, see only the indirect effects, such as a higher cost of living without a commensurate increase in income.

Framework for "Oligarchic Capture"

The bias you describe can be visualized as a cycle that reinforces distributive shares:

Initial Conditions
Wealthy Households (Asset Heavy) → Greater Access to Credit

↓

Monetary & Fiscal Policy
Low Interest Rates, Quantitative Easing

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Policy Transmission
Asset Prices Inflate

Policy Transmission
Wage Growth Lags

↓

Wealth Gap Widens

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Increased Political Influence

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Policies Favoring Capital

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Cycle Repeats
Returning to Greater Access to Credit

This cycle illustrates how initial advantages in wealth are reinforced and amplified by the system's structure. The "reach for yield" is a symptom of this environment, as the search for returns in a world of inflated assets and low safe rates itself drives further risk-taking and asset inflation.

Your panoramic observation aligns with a significant body of economic criticism. The system's plumbing, combined with the difference between asset and consumer inflation, does appear to create a distributive outcome that disproportionately benefits a capital-owning class, leading to the "oligarchic capture" you describe.