How This All Happened

Author: [[Morgan Housel]] Link: https://www.collaborativefund.com/blog/how-this-all-happened/

Notes by Section

  1. August, 1945. World War II ends
    • Worried about what all our soldiers are gonna do what they get home
    • the country had a full on meaning crisis
  2. So we did something about it: Low interest rates and the intentional birth of the American consumer.
  3. Pent-up demand for stuff fed by a credit boom and a hidden 1930s productivity boom led to an economic boom.
  4. Gains are shared more equally than ever before

    • "This was not a short-term trend. Real income for the bottom 20% of wage-earners grew by a nearly identical amount as the top 5% from 1950 to 1980."

    • "This was important. People measure their well being against their peers. And for most of the 1945-1980 period, people had a lot of what looked like peers to compare themselves to. Many people – most people – lived lives that were either equal or at least fathomable to those around them. The idea that people’s lives equalized as much as their incomes is an important point of this story we’ll come back to."

      • All of consumer products and entertainment, across all wealth levels was largely the same. There were only 3 tv channels. Everyone watched the same thing every night.
        • Imagine the low levels of [[envy]] this allowed for
  5. Debt rose tremendously. But so did incomes, so the impact wasn’t a big deal.
    • Increases in household income and different mindsets around debt (much less fear, much more optimism) made the larger amount of personal debt much more manageable
  6. Things Start Cracking
    • Goddamn [[What The Fuck Happened in 1971]] (actually 1973) rolls around, of course, shit slowly starts to be flung at the fan

    • "But equality in lifestyle and consumption expectations; the idea that someone earning a 50th percentile income shouldn’t live a life dramatically different than someone in the 80th or 90th percentile. And that someone in the 99th percentile lived a better life, but still a life that someone in the 50th percentile could comprehend. That’s how America worked for most of the 1945-1980 period. It doesn’t matter whether you think that’s morally right or wrong. It just matters that it happened."

    • "Expectations always move slower than facts. And the economic facts of the years between the early 1970s through the early 2000s were that growth continued, but became more uneven, yet people’s expectations of how their lifestyle should compare to their peers did not change.""

    • I've never thought about how our expectations and comparisons have shifted through history
  7. The boom resumes, but it’s different than before.

    • "Between 1993 and 2012, the top 1 percent saw their incomes grow 86.1 percent, while the bottom 99 percent saw just 6.6 percent growth."

    • "While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone."

    • "All that matters is that sharp inequality became a force over the last 35 years, and it happened during a period where, culturally, Americans held onto two ideas rooted in the post-WW2 economy: That you should live a lifestyle similar to most other Americans, and that taking on debt to finance that lifestyle is acceptable."

  8. The Big Stretch

    • "The lifestyles of a small portion of legitimately rich Americans inflated the aspirations of the majority of Americans, whose incomes weren’t rising."

  9. Once a paradigm is in place it is very hard to turn it around

    • "Economist Bhashkar Mazumder has shown that incomes among brothers are more correlated than height or weight. If you are rich and tall, your brother is more likely to also be rich than he is tall."

    • People like the idea of being able to support similar lives as their neighbors
  10. The Tea Party, Occupy Wall Street, Brexit, and the rise of Donald Trump each represents a group shouting, “Stop the ride, I want off.”

    • "History is just one damn thing after another."

One last thing

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