The importance of assets (stocks) versus incomes (flows) in economics cannot be overstated, yet it is not well understood. Michael Milken this morning in The Wall Street Journal explains why Baby Boom retirements won't, as many believe, cause financial market instability, let alone a crash.
Baby boomer asset liquidation isn't really a financial market issue because (1) there's plenty of liquidity in the global economy; (2) as the rest of the world becomes wealthier, people outside the U.S. will own a greater percentage of global assets and they'll want to keep a share of their net worth in America; (3) liquidity will grow in both developed and developing nations as they adopt recent American financial innovations and market structures; (4) as baby boomers live longer and healthier, their new mantra will become "Who wants to retire?" and (5) most assets won't need to be sold.
Milken keenly observes that "In the future, aging workers will be healthier and will use broadband technology to live and work from anywhere at the increasing proportion of jobs that involve knowledge rather than physical labor." But for this important dynamic to occur, we've got to make sure American citizens actually have real broadband. So add retirement policy and Baby Boom financial stability to the long list of reasons why rational and far-sighted broadband and telecom rules are so important to future economic success.
Milken continues to be one of the most creative financial and economic thinkers out there. I just spent two weeks in Beijing with another of the most creative financial minds around, John Rutledge, who pioneered thinking about asset stocks versus income flows 25 years ago. Both Milken and Rutledge will be speaking at our 10th annual Gilder/Forbes Telecosm Conference in Lake Tahoe, Calif. October 4-6.