🔋Generational Wealth
Are baby boomers the most selfish generation?
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Boomers are selfish. As a Gen Z member (barely), this may be shocking for me to say as young people always tend to get a bad wrap for being lazy, selfish, or you name it. Of course, not every boomer is selfish, but could it be true on average? The baby boomers refer to Americans in their 60s and 70s today. They were born following World War II from parents who not only witnessed the greatest economic depression in US history, but also two World Wars. Could this be the embodiment of the famous saying, “hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times”, and as the cycle continues?
Canada’s most recent election most certainly makes the case. I don’t have a political leaning and frankly don’t know much about Canadian politics, but it is interesting reading about voting factors. Agencies or Universities often ask voters which issues mean the most for their vote. Interestingly, boomers chose “dealing with Trump” and “improving Canada’s healthcare system” as top factors, leaving little thought for factors like “making housing affordable” or “making Canada a better place to live”. On the flip side, young folks don’t care about Trump, but are very worried about housing, the economy, and making Canada better. Are boomers just older and wiser?
Let’s first take a step back. The 1970s were a time of great change in the US, and marked the boomers’ coming of age. Social change was being solidified as a new way of life, and with the Vietnam War over, it was time to focus on domestic interests. Political shifts were large as well. Nixon severed the dollar’s tie to gold and got impeached, and foreign policy rose in importance with globalization and oil shocks. Even within 20 years, pop culture began to satirize the new boomer way of life in movies like Forrest Gump (running sequence and outfits) or sitcoms like Seinfeld, which was a self-proclaimed “show about nothing”.
The baby boomers not only have the most political influence today, but have also amassed tremendous wealth. This is partly explained by age being favorable for wealth generation due to compound interest and more income generation. However, if you adjust for age, the boomers had considerably more wealth by age 35 than Gen X, and the millennials are in an even worse spot.
I think the wealth picture can be explained by several factors. The 1970s marked a shift in the US, with a government no longer contained by the burden of gold. This led to an unbridled increase in the money supply through continued government intervention. This inflation manifested most clearly in asset prices. Over time, stocks, bonds, and housing have seen extraordinary returns. With debt being an instrument of pulling future productivity into the present, Boomers were unknowingly to be the primary recipients of this. Born into social changes and programs (Medicare and Medicaid) while becoming more politically involved as they age has boomers fighting to keep and grow their institutional benefits. Social programs disproportionally help them as they retire and put burdensome costs on the taxpayer and the federal budget. Further, continued government intervention in asset markets has helped exacerbate the greatest asset bubble the US has ever seen, further increasing their wealth.
There will be a great wealth transfer from the boomers, one way or another. Will it be a peaceful transition through death at old age, through wealth destruction by depression, or even social revolution by younger generations who begin taking over the political reins?
Could this natural selfishness grow into a resentment from younger groups who feel they’ve been cheated out of a certain way of life? Will the thrill result in the “bad times” and leave younger generations to fight the wars or go through the depression required to train future generations in the values of savings and selflessness? Could the economic hardship strike sooner rather than later, leaving boomers relying on their wealth for retirement in trouble? Unfortunately, some or all of these are possibilities to some extent, which means we should not take the relatively stable past and necessarily extrapolate into the future.
There are many stories throughout history of families fighting tooth and nail to earn and keep generational wealth. These days, many boomers and some younger folks are electing to spend money rather than pass their wealth on to their children[1,2]. Not all boomers are selfish, but circumstances allowed their generation to get lucky and amass wealth. Now older and politically involved, they are certainly not going to give it away so easily. While we can hope for good outcomes, there are unfortunately some “hard times” scenarios that could result in some pain for themselves and the younger generations. Until next week,
-Grayson
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Funny thing about the stock market, you can have 20 million traders pushing a stock up to, say $100 but circumstances can change and if only one buyer is willing to pay $50 for the same stock you've wiped out 20 million of traders of half their wealth (on paper).
As a tail-end boomer I don't disagree with your assessment ---peace and love were convenient until the boomers discovered money, heh, I'll never forget in the early 80s seeing BMWs in the parking lot of a Grateful Dead concert. I'm probably more of a Gen X'er but I won't escape blame for having it good in those years. Even so it was the post ultimate-boomer's Clinton/ Gore regime, the conservative boomers Bush/Cheney/Greenspan that made sang the siren song of tax cuts and making money cheap (and piling up the federal debt) which also started driving up housing and the stock markets. Nasdaq was at 1,335 in 2002!