Will the so-called “babies” cause more inflation?

Conventional economic theory says that aging is anti-inflationary. Older individuals and families tend to consume less than younger ones, and they often reduce the size of their homes because their children no longer live with them. Therefore, economic models usually take into account that the increase in the proportion of the elderly and/or retired is negative for demand, thus combating inflation, as a long-term study by the International Monetary Fund shows.

But we may be at a major turning point in this theory, at least in some rich countries like the United States. calls Baby Boomers They live longer and are less willing to cut corners. The coronavirus pandemic has made those who still work (and there are plenty, because today’s seniors are healthier and also want to boost their retirement savings through income generation) to stick more to their big homes rather than settle in an apartment. They can certainly afford it, as they still control more than half of the country’s wealth, and show little sign of wanting to pass it on to the next generation.

In addition, they spend more not only on health care, but also on other services. Project investigation National Transfer Accounts, which tracks consumption patterns in 40 countries, finds that not only does consumption decline with age in places like the United States, Germany, France and Japan, but that young and old often consume more than they earn as workers, which is inflationary. .

Part of this has to do with debt, spending, and the impact on wealth from rising asset prices over the past few decades. That time may be behind us, perhaps long enough, as an interest rate hike by the Federal Reserve deteriorates markets. But I know a lot of older spending millennials (who came of age in the post-financial crisis era, and paid for it with low wages and low expectations).

Rana, let me begin by dismissing a country house in the English countryside, not least because my Irish wife might find it too Anglican for her. I have little idea of ​​where we’ll end up or if we can afford it. But it would have to be a big city, so it would probably be London. As much as I love living in Washington, D.C., I don’t want to be one of those guys who spend the fall years attending intellectual seminars on the Central Asian Pipelines. I have two general assumptions. The first is that I am only in the middle of my beneficial career. Even though I’m 54, I hope to continue writing, traveling and contributing until I’m 80, and I’m not afraid. As writers, we don’t clean floors or deliver packages, so the prospect of continuing the business will be a lifestyle choice, not hard work. It’s a wonderful world and I hope to always be lucky enough to be able to participate in it.

Second, we are too young to take advantage of the exorbitant privilege of high, fixed pensions, so we are hostage to asset prices that can go down or up as well (although until recently our generation only saw them go up). I don’t have big savings because I am a careless journalist and I don’t like deferred consumption very much. But I started to grow. I recently learned that the FT’s matching contributions are very generous if you pick the cap, which I recently did. So I can only blame myself for the years of free money I didn’t bother taking advantage of. However, there is so much to go on and start falling asleep every time I listen to the actuaries. I definitely plan quite a bit and might pay for it when I’m old. But some people plan a lot and I don’t envy them.