How the Fed Contributes to Generational Inequality

Stanley Druckenmiller lays out how the Federal Reserve's asset purchases are increasing inequality in America.  These asset purchases raise the price of financial assets.  That benefits the holders but does little for those who don't own stocks.   

Though framed in terms of the rich versus everyone else, Fed policy also increases inequality between the generations.  Older generations have had time to build up their holdings of stocks and other financial assets.  Their portfolios have benefitted form the run up of non-stop Fed simulative policies for the past thirteen years (low rates, massive asset purchases).  Younger generations are the losers.  Young savers and investors are confronted with having to buy into a massive asset bubble with inflated asset prices for everything--homes, stocks, bonds etc.--or to save with negative real interest rates.  

As I have blogged before, the current investing environment is one of the worst for young people in the past 40 years.  A big part of that is the never-ending stimulus of Fed programs. 

Millennials are Not Going to Get Rich Thanks to "Bernie Sanders' Policies

Investment giant Charlie Munger tell it like it is at the Berkshire Hathaway annual meeting. 

However, instead of offering some support to these newly-hatched capitalists who dream of achieving Buffett's success, however on a far more truncated timeframe, Charlie Munger had some stark words of discouragement when it comes to the next generation seeking to master the stock market.

“Bernie Sanders has basically won," the 97-year old said. "He did it by accident, but he won."

Munger then followed up with a sad truth which the largest US generation will hate to hear: "the millennial generation is going to have a hell of a time getting rich compared to our generation" the billionaire said, referring to its engagement with the stock market, where for now at least, millennials appear to be winning but Munger is confident that it will all end in tears. 

So true

 

This says it all