Picture the overflow outlets through Glen Canyon Dam on the Colorado River, giant 30 foot wide tunnels at the bottom of a six hundred foot wall of concrete. Picture that time in May when the water managers “let ’er rip”, when they loose steely jets of water from those tunnels to replicate the spring runoff that once replenished the river beaches and backwaters and is now banished by the dam.
Now picture your riverside garden fifteen miles down canyon. Picture your carefully dug irrigation trench following a contour across the bank to your tidy little planted rows, the seedlings just peeking above the soil. And here comes the flood, seventy five thousand extra cubic feet per second, raising the river level four feet above your garden. This is the kind of mismatch between capital needs and capital supplies that faces small businesses, municipalities, and local banks when they go to deal with the “giant pools of capital” where most of the world’s wealth now resides.
These vast reservoirs have been accumulating for decades, partly from the natural advantages that capital grants its owners, partly as a result of “supply side” government policies that limited the redistribution of wealth back down to the “bottom” 80 % of citizens. In the U.S. 90% of the total wealth now gathers in those reservoirs, owned by a couple percent of Americans and controlled by a microscopic few. And now, instead of fueling business investment, job creation, and greater wealth for the average folks as promised, the pools have grown too large to serve the small scale investments critical to Main St. at all.
What happens to this ocean of cash, where does it find a home? Well, much of it is entrusted to wealth managers; the hedge fund guys and Mutual fund managers and commodities brokerage houses that can swallow capital in multi-billion dollar chunks. The job of managing great wealth is a profession unto itself, not necessarily related to the enterprises that created the wealth in the first place. Managing large capital holdings is usually not the forte of entrepreneurs and certainly not the baliwick of the second and third generations who inherit giant estates.
These guys (they’re mostly guys) who manage the billions often tend to chase each other…