For those of you who have no idea what this phrase means, let me explain it to you.
Interest: interest rates.
Arbitrage: is the practice of taking advantage of a price difference between two or more markets.
Simply put, the rich get richer by taking in a higher interest rate return than the interest they pay on the loan they take.
I borrow $1 million from the bank at 2% interest.
I lend it out to someone at 6% interest.
By doing nothing, I earn 4% interest.
Of course, the real-life example is not that simple. But as an illustration to show you the point.
More Common Example:
I buy a house for $1 million.
I put a 10% down-payment ($100,000) and borrow the rest of the $900,000 from the bank.
And yes, the banks are more than willing to lend huge sums of money to rich people than to the average Joe and Jane.
Here’s where it gets