Don’t know if you caught the Democratic debate the other night, which featured Bernie and Joe, who could be the grandfathers of some of the younger candidates that were on stage, but it also confirmed the arrival of what we have been writing about for years, the Clash of Generations.
Congressman Eric Swalwell was one the young Democrats on stage with Bernie and Uncle Joe last week.
If you missed this Atlantic piece, it is definitely a must-read,
Money Quotes:
In a variety of different areas, the Baby Boom generation created, advanced, or preserved policies that made American institutions less dynamic. In a recent report for the American Enterprise Institute, I looked at issues including housing, work rules, higher education, law enforcement, and public budgeting, and found a consistent pattern: The political ascendancy of the Boomers brought with it tightening control and stricter regulation, making it harder to succeed in America. This lack of dynamism largely hasn’t hurt Boomers, but the mistakes of the past are fast becoming a crisis for younger Americans.
…Boomers didn’t only make rules that nudge young people out of homeownership. They also made new rules restricting young people’s employment. Laws and rules requiring workers to have special licenses, degrees, or certificates to work have proliferated over the past few decades. And while much of this rise came before Boomers were politically active, instead of reversing the trend, they extended it.
...The most glaring example of this growth in regulation and control is also the easiest one to pin on Baby Boomers: the incredible rise in incarceration rates. Even though murder rates are today at the same levels they were in the 1950s, the imprisoned share of the population is higher in America than in any country other than North Korea. We imprison a larger share of the population than authoritarian countries such as Turkmenistan and China.
…Even young Americans today who are free from prison are nonetheless in bondage to debt—sometimes their own debt, in the form of rapidly growing student loans or personal and credit-card loans. But on a larger scale, the problems of entitlements, pensions, Social Security, Medicare, and federal, state, and local debt are becoming more severe all the time. Already, in places such as Detroit, Illinois, and Puerto Rico, where political rules make flexible solutions hard and the population is aging very quickly, massive debt restructurings loom large. But around the country, the pressures of long-term obligations will grow.
…Making these payments will require fiscal austerity, through either higher taxes or lower alternative spending. Younger Americans will bear the burdens of the Baby Boomer generation, whether in smaller take-home pay or more potholes and worse schools.
Furthermore, the basic demographic balance sheet is getting worse all the time, increasing the relative burden on young people. Working-age Americans are dying off in alarming numbers.
[Take a minute and study the above chart. Probably some of the saddest data I have ever seen. These data are often overlooked and ignored from the comfort of the gated retirement communities.]
…The odds of a 32-year-old dying have risen by 24 percent in the past five years, even as death rates among older Americans are about stable. Baby Boomers are living longer even as the workers who pay for their pensions are dying from an epidemic of drug overdose, suicide, car accidents, and violence.
…If leaders in business, education, and politics want to solve these problems, they can. Whether the gerontocracy in charge today wants solutions may be another question altogether. – The Atlantic, June 24th
Our Warning In July 2011
We posted the following in The Clash of Generations way back in July 2011,
How long before the young realize they’ve had their future stolen from them by the baby boomers? The answer to this question will determine your defined benefit pension, social security and medicare benefits. Reality meets [the boomers] at sunset. – GMM, July 2011
Now. They are woke.
We also exhorted boomers in an even earlier post to, as a metaphor, give up their country clubs for muni golf courses in order to free up resources and give the young a fighting chance. It is a social investment for the boomers, after all, the younger generations will determine the fate of their underfunded pensions, social security, and medicare programs
Monetization Coming
We do think the young will choose monetization to finance the shortfalls and debts the boomers have bequeathed them as the case gains political credibility through the rise of Modern Monetary Theory.
A form of a “People’s QE” is inevitable, in our opinion, and that is why we totally disagree about the end game with the deflationistas, who, suffer from recency bias and have probably never spent a day, much less a week, in an economy suffering from hyperinflation.
Zero interest rates for an extended period (as in five and ten-year slogs, ala Japan)? Not U.S. market rates, folks, if there are any remaining, which is questionable, we do concede.
America is not a net saver, has been dependent on foreign savings to finance is public and private deficits for years, and its net international investment position (NIIP) has crossed over the $10 trillion deficit mark in Q2 2019.
This compares to NIIP surpluses in Japan and Germany of around $4 and $2 trillion, respectively.
Contemplate for a moment the long-term consequences of the above chart for, say, the exchange value of the U.S. dollar.
Hayek May Be Prescient Yet
Frederick Hayek understood demographics and the aging population would be at the mercy and charity of the young,
In 1960, Friedrich Hayek predicted in The Constitution of Liberty “that most of those who will retire at the end of the century will be dependent on the charity of the younger generation. And ultimately not morals but the fact that the young supply the police and the army will decide the issue: concentration camps for the aged unable to maintain themselves are likely to be the fate of an old generation whose income is entirely dependent on coercing the young.” It hasn’t turned out that way at all—a salutary warning that it is much easier to identify generational conflicts of interest than to anticipate correctly the political form they will take. – The Coming Generation War, The Atlantic
Just some more potential political conflict to stuff in your pipe and smoke, folks.
Not sure if the younger gens will wrestle the power torch from the gerontocracy in 2020 but they will someday.
Boomers best be kind to the Millenials, X, Y, Z, and Alpha generations.
They are woke, not happy, and left of the salad fork.
Global Macro Monitor 