The Millennial Wealth Gap

Millennials that are in or approaching their high earnings years are finding out that they are not as prosperous as previous generations.   The problem is high debt and the effects of having lived through two deep recessions early in their careers.  From the Wall Street Journal:  

Older millennials in their high-earning years are also still working to recover lost ground from previous bouts of unemployment or underemployment caused by the 2008 financial crisis, according to a 2020 study from the National Bureau of Economic Research.

“You carry that with you for a long time, maybe your whole career,” said William Gale, one of the authors of the study and a senior fellow in the Economic Studies program at the Brookings Institution.

Do you, or does someone you know, expect the late 30s to early 50s to be the high-earning years? Join the conversation below.

The study—which examined household wealth across generations using data from the Survey of Consumer Finances, a survey conducted every three years by the Federal Reserve—found that the 2007-09 recession significantly reduced wealth for all age groups, and younger cohorts in particular. In 2016, millennial households held around 12% less wealth than did households headed by a person of the same age in 1989.

In 2019, the Federal Reserve Bank of St. Louis found older millennials’ debt-to-income ratios to be 23% higher than expected, based on previous generations at similar ages.

The overall real average wage of 2018 had the same purchasing power as it did 40 years ago, Drew DeSilver, a senior writer at Pew Research Center, wrote in an article. That means despite the strong gains in earnings and a growing post-pandemic labor market, many millennial households may not see more flexibility in their budgets, according to Mr. DeSilver.

Depression Soars Among Young People

Panic purveyors in the media and political class have had a heavy toll on young people.  A new study shows that depression and suicide rates among young people have soared as a result of the social isolation imposed by the pandemic.  

School closing have been particularly hard on young people.  The school closing are particular wrong headed because schools have not been shown to be centers for the transmission of COVID.  

"Being socially isolated, kept away from their friends, their school routines and extracurricular activities during the pandemic has proven to be difficult on youth," said lead researcher Sheri Madigan.  She is an assistant professor in the department of psychology at the University of Calgary, in Canada.

"An important consideration for keeping schools open should be the mental health and well-being of youth," Madigan said.  Children tend to thrive when their environment is predictable, and in-person learning allows for more consistent routines and structure, so keeping schools open may protect children from mental health problems, she said.

The increase in suicide and depression rates is particularly alarming.

Dr. Victor Fornari, vice chair of child and adolescent psychiatry at Zucker Hillside Hospital in Glen Oaks, N.Y., said he has seen firsthand the increase in mental health problems among the young.  "We've seen in our emergency rooms a 50% increase in suicidal adolescents presenting over the past 12 months and an almost 300% increase in admissions for eating disorders amongst adolescents," he said.

The pandemic has been stressful for adolescents as they struggle with home instruction and virtual schooling, Fornari said. "School is their social network. Without being with their peers, their friends, they're in a more stressful environment at home."

Not Your Parent's Economy

 Charles Hugh Smith from Of Two Minds blog explains how changes in the economy have resulted in massive inequality in America.  

This wholesale transfer of risk from elites to the workers is finally becoming consequential as wealth / income / security inequality is reaching extremes that are destabilizing society and the economy. As Gordon Long and I explain in our new video, The World Just Got a Lot Riskier crony capitalism has transmogrified into predatory capitalism as government, finance and the corporatocracy have allied into a seamless (and seamlessly corrupt) elite class that has offloaded systemic risk onto the unprotected class.

This is a bad development for young people who have no memory of a country where the middle class was much larger and mattered.  The passage pointing out how Federal Reserve's negative (real) interest rate policies are devastating small savers is well worth reading.  

4. Federal Reserve policies have destroyed safe yields on savings and money-market accounts, forcing workers to take on the enormous risks of the rigged stock market casino (which is rigged to benefit high-frequency traders, front-running trading houses, and those with asymmetrically distributed information, i.e. insiders).

A COVID Apology from the Media

In an extraordinary statement the chief editor of Bild, the largest German newspaper, apologizes for harming young people and especially children with all the scaremongering over COVID.   The apology  is a blunt admission of the harms caused by the media and government.  He says:

"Millions of children in this country, for whom we are all responsible as a society, I would like to say what our Federal Government and our Chancellor have not dare to say so far: We ask your forgiveness. We ask your forgiveness for a year and a half of politics, who sacrificed you."

The statement, which is in German but with English subtitles, is available here.  

This blog has pointed out on several occasions that high cost of the lockdowns and the fearmongering of the media and the political class.  Let's hope that the statement by Reichelt is a crack in the wall of media disinformation about COVID and its consequences for the population.  

Poll: Gen Z Most Opposed to Cancel Culture

Good news.  A new poll by the Morning Consult shows that Gen Z is the most opposed to cancel culture.  

Bad news: Millennials are most in favor of cancel culture.  

Ziad Jilani has the story:

Perhaps surprisingly, given its progressive leanings and similar social and political beliefs to the millennial generation, Gen Z was the cohort most opposed to cancel culture: 55 percent said they had a negative view of cancel culture, 8 percent were supportive of it, 18 percent were neutral, and 19 percent had no opinion. Moreover, it’s the youngest cohort within Gen Z—currently ages 13 to 16—who are most opposed to cancel culture, with 59 percent having a negative view of it. That number falls to 48 percent for the oldest cohort within Gen Z—ages 21 through 24.

Also: the poll again showed that Gen Z has higher approval of socialism that capitalism.  Not surprising given that they have grown up in an era of never ending bailouts, rampant cronyism, and Federal Reserve policy that favors asset owners who are generally older over asset buyers who are generally younger.  

Financial Repression Coming

Peter Schiff lays out the case for financial repression--interest rates below inflation rates--in a blog post at SchiffGold.  

The fact is that given all of the debt the US economy can’t handle the high interest rate environment necessary to tame rising prices. The Federal Reserve boosted interest rates modestly to 2.5% in 2018 and all hell broke loose. The stock market crashed, and the Fed was forced back to loose monetary policy even before the coronavirus pandemic. As Schiff noted in a podcast, if the economy couldn’t handle higher rates in 2018, it certainly can’t handle them today.

The level of debt is so much greater than it was then. And so, the more debt you have, the lower interest rate is required to be able to service that debt. So, if two-and-a-half percent was too much when the national debt was significantly lower than it is today, then that threshold is much lower. I don’t even think we could survive a move to one percent from the Fed.”

It seems almost certain the massive budget deficits will continue into the foreseeable future. That means the government will need to continue borrowing and it will need the central bank to keep its thumb on the bond market to make that possible. That means no tightening.

Financial repression is bad news for young people trying to save and accumulate assets.  Millenials and GenZers wealth is far below that of the Boomers and older generations at the same age.  Financial repression is going to make it even harder for young people to build nest eggs as inflation eats up their savings.    

Bidenomics Explained

 It's really not that complex.  Just substitute Biden for Corbyn and it all makes sense.