The Psychology of Money review

The Psychology of MoneyThe Psychology of Money by Morgan Housel

My rating: 4 of 5 stars

I bought this book on accident. (I meant to download a sample but foolishly clicked on a link to “log in and buy” it, for which I will accept 90% of the blame and pass 10% along to Barnes and Noble) But it’s a nice short book, summarizing a bunch of financial wisdom that I’ve read other places like luck is a bigger deal than you think, save money even if it’s not for something in particular to give yourself flexibility, don’t spend too much money, etc. It is presented pretty nicely, though, and has a few ways of thinking about things I haven’t seen before, so I’d recommend giving it a read if the topic interests you.

Honestly, the most interesting part was the postscript where Housel tries to reverse-engineer the American psyche when it comes to money. Why do Americans get into so much consumer debt? Well, his theory goes something like this:
– After World War II, there was a ton of pent up demand for stuff, and “hidden” productivity increases in the 1930s led to an economic boom.
– The economic gains from this boom were shared fairly equally across classes, and people’s lives seemed pretty equal
– Recession, etc. in the 1970s, and the economy started to boom again in the 1980s. But this time, the gains were not shared equally at all – for example between 1993 and 2012, the incomes of the top 1 percent grew 86%, but the bottom 99 percent’s incomes only grew 6.6%.
– So middle class people were used to looking at people around them and thinking they could afford that lifestyle, but this wasn’t true any more because the rich were so much richer (relatively speaking) than they used to be. And it takes a long time for expectations like this to change.
– People eventually realized things weren’t working for them, which led to some parts of the Tea Party, Occupy Wall Street, Brexit, and Trump. Obviously there are more things going on here than just economics, and I don’t feel qualified to really say much about Brexit, but this does ring true to me…

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