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There’s a devastatingly simple explanation for America’s economic mess
"The biggest drag on the economy has been the aging and retirement of America’s baby boomers"
"demographic changes account for a 1.25 percentage point decline in annualized economic growth since 1980, which is essentially all of the decline we’ve seen in that metric"
"What’s really remarkable is that we might have seen this coming."
Hi @Old_Joe I believe we here (MFO) have been discussing the "boomers" and possible ramifications going forward for some time (years). Secondly, IMHO; are those who never placed much of their monies into the "market" and felt more comfortable with CD's; or those who have run away from the market since the melt, lost some of their money and will never return. Some of them moved monies into CD's, too. Obviously, CD rates are not keeping these folks in gear with inflation and no or little cost of living for their social security. Thirdly, that some of the younger ones may not be placing monies into market investments at the pace or volume of the boomers who have invested for the past 30 or so years. All of these, and more items will have effects upon the economy; especially in a cumulative circumstance. Have a pleasant time at the River. Regards, Catch
No forecast of improving growth as the 4th Quarter begins.
09/28/2016 UCLA Anderson Forecast Looks at Economic Growth amid Presidential Elections UCLA Anderson Forecast’s quarterly outlook for the national economy foresees real gross domestic product growth in the 2.0% to 2.5% range throughout 2017 and 2018, where it has been for the past seven years. With the economy approaching full employment, employment growth is expected to slow from what has been a consistent 200,000 jobs per month to about 150,000 per month in 2017 and 125,000 per month the following year. 3-4 paragraphs on these topics. How Does the Economy Affect the Presidential Election?.. The National Forecast.... The California Forecast..... http://blogs.anderson.ucla.edu/anderson/2016/09/ucla-anderson-forecast-looks-at-economic-growth-amid-presidential-elections.html
October 7, 2016: Highlights (?????) The FRBNY Staff Nowcast stands at 2.2 % for 2016:Q3 and 1.3 % for 2016:Q4. News from this week’s data releases left the nowcast for Q3 virtually unchanged and pushed the nowcast for Q4 up slightly. Positive news came from international trade data as well as the manufacturing and non-manufacturing ISM business surveys. https://www.newyorkfed.org/research/policy/nowcast
But the millenials, from what I have read, now outnumber the baby boomers. And many are not yet in spending mode. That will come later. Does that mean the economy is destined for a major upswing in the next 10 years? I don't put much store in the baby boomer retirement as the reason for a slow economy. I do put much more blame on the various entities in Washington: bizarre monetary policies, deficit spending with not much to show for it, crazy health care costs despite passage of massive legislation that has created a mess that only Washington bureaucrats could love, and lack of tax code reform. When you add the absurd cost of college education and young people unable to find work in their chosen field, but saddled with a mortgage-size college loan debt, no wonder they are not spending. Laying the slow economy on baby boomers is a deflection at best.
Bob said it well. I'll add that once many of us boomers are six feet under (a migration that's already begun), a lot of that accumulated liquid wealth will transfer into the hands of younger heirs. Depends on individual cases, but my suspicion is that most of that money will be spent quite quickly, providing economic stimulus.
I tried earlier to write a lengthy piece putting the rise and maturation of the boomer generation into historical perspective. It turned into an unwieldy "octupus", encompassing such diverse elements as the post-World War II birth of the boomers, the post-war reconstruction of Germany, Japan and much of Europe, the immense loss of life the war wrought (mainly young working age males), the end of war related rationing here at home and the evolutionary effects of the boomers on consumption, labor markets, the educational system, etc.
I eventually deleted the whole thing and simply stated that I thought simple was an appropriate way to describe the thesis set forth in OJ's original piece.
Has anyone considered that the investment version of the law of large numbers might be the simplest explanation:investopedia.com/terms/l/lawoflargenumbers.asp As a company like Walmart gets really big its harder for it to grow its top or bottom line (My impression is this is not the mathematical version of the law, but how the investment community has, perhaps mistakenly, adapted it.) So think of the U.S. as a mature blue chip company in which its GDP represents revenue or earnings. Once our GDP is at the $18 trillion level as it is today, it is not so easy to grow so quickly off such a high base. Compared to an emerging economy with a low GDP it's much more difficult for us to have an accelerated growth rate.
This has interesting implications. Because what do mature companies do--or are supposed to do if they are using their capital wisely? They return capital to shareholders in the form of dividends. Well, think of Social Security, welfare, unemployment insurance and something I believe David Moran has discussed Basic Income Guarantee as dividends. https://en.wikipedia.org/wiki/Basic_income
In a mature economy which can't grow rapidly anymore it may make more sense to have a greater social safety net to handle the ramifications of that slower growth--fewer good paying jobs. It also may make sense to shorten the work week so there are more jobs to go around as automation replaces workers. Such measures may be less necessary in rapidly growing developing nations. But dividend payouts to get some people out of the workforce and some people to be working fewer hours could stabilize things for a lot of people. If anything the age to receive Social Security should be lower, not higher, to handle the "new normal" of fewer jobs, high automation and slower economic growth. People should be encouraged to retire or work fewer hours as they age so younger people can find work.
If work hours are smaller and people retire earlier then how will there be enough contributions to the Social Security Funds to enable the government to pay Social Security at an earlier age rather than later. How many trillions of government debt is the country ready to accept. So far the debt level is always raised so discipline means nothing.
One of the problems we have in this country is that young people are not prepared in the High School to make career decisions. Conventional colleges are emphasized and vocational school education is given the short end of the stick. Of course there are many social problems such as drug culture for example that play into the dependency needs of the people of the U.S. prinx
Comments
I believe we here (MFO) have been discussing the "boomers" and possible ramifications going forward for some time (years).
Secondly, IMHO; are those who never placed much of their monies into the "market" and felt more comfortable with CD's; or those who have run away from the market since the melt, lost some of their money and will never return. Some of them moved monies into CD's, too. Obviously, CD rates are not keeping these folks in gear with inflation and no or little cost of living for their social security.
Thirdly, that some of the younger ones may not be placing monies into market investments at the pace or volume of the boomers who have invested for the past 30 or so years.
All of these, and more items will have effects upon the economy; especially in a cumulative circumstance.
Have a pleasant time at the River.
Regards,
Catch
Derf
09/28/2016
UCLA Anderson Forecast Looks at Economic Growth amid Presidential Elections
UCLA Anderson Forecast’s quarterly outlook for the national economy foresees real gross domestic product growth in the 2.0% to 2.5% range throughout 2017 and 2018, where it has been for the past seven years. With the economy approaching full employment, employment growth is expected to slow from what has been a consistent 200,000 jobs per month to about 150,000 per month in 2017 and 125,000 per month the following year.
3-4 paragraphs on these topics.
How Does the Economy Affect the Presidential Election?..
The National Forecast....
The California Forecast.....
http://blogs.anderson.ucla.edu/anderson/2016/09/ucla-anderson-forecast-looks-at-economic-growth-amid-presidential-elections.html
October 7, 2016: Highlights (?????)
The FRBNY Staff Nowcast stands at 2.2 % for 2016:Q3 and 1.3 % for 2016:Q4.
News from this week’s data releases left the nowcast for Q3 virtually unchanged and pushed the nowcast for Q4 up slightly.
Positive news came from international trade data as well as the manufacturing and non-manufacturing ISM business surveys.
https://www.newyorkfed.org/research/policy/nowcast
Latest forecast: 2.1 percent — October 7, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 2.1 percent on October 7, down from 2.2 percent on October 5.
https://frbatlanta.org/cqer/research/gdpnow/?panel=1
http://seekingalpha.com/news/3212996-gdpnow-stock-sell-q3-forecast-cut-2_1-percent
I tried earlier to write a lengthy piece putting the rise and maturation of the boomer generation into historical perspective. It turned into an unwieldy "octupus", encompassing such diverse elements as the post-World War II birth of the boomers, the post-war reconstruction of Germany, Japan and much of Europe, the immense loss of life the war wrought (mainly young working age males), the end of war related rationing here at home and the evolutionary effects of the boomers on consumption, labor markets, the educational system, etc.
I eventually deleted the whole thing and simply stated that I thought simple was an appropriate way to describe the thesis set forth in OJ's original piece.
Peace
As a company like Walmart gets really big its harder for it to grow its top or bottom line
(My impression is this is not the mathematical version of the law, but how the investment community has, perhaps mistakenly, adapted it.) So think of the U.S. as a mature blue chip company in which its GDP represents revenue or earnings. Once our GDP is at the $18 trillion level as it is today, it is not so easy to grow so quickly off such a high base. Compared to an emerging economy with a low GDP it's much more difficult for us to have an accelerated growth rate.
This has interesting implications. Because what do mature companies do--or are supposed to do if they are using their capital wisely? They return capital to shareholders in the form of dividends. Well, think of Social Security, welfare, unemployment insurance and something I believe David Moran has discussed Basic Income Guarantee as dividends. https://en.wikipedia.org/wiki/Basic_income
In a mature economy which can't grow rapidly anymore it may make more sense to have a greater social safety net to handle the ramifications of that slower growth--fewer good paying jobs. It also may make sense to shorten the work week so there are more jobs to go around as automation replaces workers. Such measures may be less necessary in rapidly growing developing nations. But dividend payouts to get some people out of the workforce and some people to be working fewer hours could stabilize things for a lot of people. If anything the age to receive Social Security should be lower, not higher, to handle the "new normal" of fewer jobs, high automation and slower economic growth. People should be encouraged to retire or work fewer hours as they age so younger people can find work.
Derf
One of the problems we have in this country is that young people are not prepared in the High School to make career decisions. Conventional colleges are emphasized and vocational school education is given the short end of the stick.
Of course there are many social problems such as drug culture for example that play into the dependency needs of the people of the U.S.
prinx