Monday, January 25, 2010

Has the financial sector actually done anything for us?

A columnist at Time magazine recently wondered, what, if anything, are financial markets good for? Clearly they enrich the stock brokers, but their utility for everyone else

I've been trying to come up with a list of the innovations that the financial sector has come up with in the last century or so that actually help people. More than that, they must be of benefit to the average user - for example, I believe that most active mutual funds are of benefit only to skilled users, compared to index mutual funds which are useful to everybody. Here's my list:

1) The ATM
2) The debit card
3) Relatively simple, well-structured, transparent insurance contracts (such as health and life insurance)
4) Index mutual funds
5) Immediate annuities (this is where you pay a lump sum for a guaranteed stream of income; technically, this could be considered insurance against old age)
6) The 30-year fixed mortgage

Are there any other suggestions?

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