The money pool

One of the factors in the current finance sector is a large pool of money. That money stems from an historically unique demographic and from productivity gains.

The grandparents of the boomers could not expect to live long enough to retire. In 1900, the life expectancy at birth was a bit under 50 years (see efmoody). Two generations later, the boomers could expect an average life span of almost 70 years. For contrast, human lifespans of more than 40 years were unusual until well into the 19th century (Wikipedia). An average means half could expect to live longer. Longer than 50 means a few more years of work. Longer than 70 means a good chance to see some retirement if you can figure out how to afford it.

Technology for everything from farming to transportation to medicine to modern manufacturing management also had not changed much prior to the 20th century. The changes that marked the 20th century meant that each worker produced more and could do more and was healthier and more fit as well. Add this to a longer period of productivity and the result is wealth generation never before seen in human history.

All of this wealth owned by the common man presented a problem. You don’t stick that much under the mattress. So you bought stuff with it, stuff that you could sell later, preferably at a profit like real estate, stocks, and other financial instruments. This created a market for managing these transactions and keeping track of things. That created distance between the wealth and its basis and that opened the door that has resulted in an historic dump in stock values.

Comments are closed.