Friday, February 20, 2009

Peak Boomers

You have heard of peak oil, I give you peak boomers. I believe demographics are a driving under-current of this crisis. Boomers, the generation born between 1945-1960 are now 50-64. The middle at 57. Peak boomers have finished buying ever bigger and bigger houses, theirs kids gone to college. They are done taking debt nearing retirement. Peak debt was reached and I believe that the straw that brought the proverbial camel's back is peak boomers going in reverse, deleveraging, helping trigger the current crisis. Of course the banking excesses took a life of their own, with endogenous money creation, but a driving force may have been peak boomers. The same case can probably be made for Japan 1990. Demographics...

8 comments:

Anonymous said...

this from Wikipedia: People under 20 years of age made up over a quarter of the U.S. population (27.6%), and people age 65 and over made up one-eighth (12.6%) in 2007.[11] The national median age was 36.7 years.[11]

http://en.wikipedia.org/wiki/Demographics_of_the_United_States

Anonymous said...

an even better age breakdown:

http://factfinder.census.gov/servlet/STTable?_bm=y&-qr_name=ACS_2007_1YR_G00_S0101&-geo_id=01000US&-ds_name=ACS_2007_1YR_G00_&-state=st&-_lang=en&-redoLog=false

Andrew Meyer said...

The demographic argument also suggests what will eventually end the recession/depression, at least in America.

Millenials, born between 85 and 9/11 will be the largest generation ever. When they start turning 35, they will enter their peak spending period and will grow the US economy.

Further evidence that the US will do very well in the future.
http://www.atimes.com/atimes/Global_Economy/KB18Dj05.html

Blissfully, I will just be turning 50 at that time and look forward to their increased spending boosting our economy and my investment portfolio.

I feel better already...

Roy Russo said...

I don't understand how the aging population would fuel the problem. Most of these people bought their homes a decade, or more, ago. Folks in their 50s/60s don't generally take on new mortgages on low and fixed incomes.

I think the view of that generation is also vastly different to us. They come from a time without credit cards and the belief that you have to live with the bank owning you.

Marcf said...

Andrew,

good point, it goes both ways, from the chart shown by anonymous, it seems you are right, the millenials do show up as a "boomlet".

This means an american lost decade... the obama years?

Marcf said...

Roy,

I don't agree with you there, the boomers are certainly not the saver generation. Look at saving rates... zero. The problem is the prices have been driven up so much in real estate that it is really hard for first time buyers to even get in. That was fine while they could sustain it, but they can't.

Marcf said...

Anon,

thanks for the link to the census.gov website. I wished they showed a demographics curve (the ones that look like christmass trees) from 20 years ago and today. I remember these curves being a clear pyramid with a huge bulge of the boomers. So the expansion due to the head bulk of boomers coming in after a generation that had fought WW2 is what drove the economy. On that you have to had the debt accelerators. Look at the numbers in the chart, fascinating: IT IS FLAT! with boom in the boomer (7% and above tranches) and the boomlet (their children) but for the most part it is A STRAIGHT LINE. It reminds me of the chart of Japan in the 80's.

The moment debt expect debt to bail it out (e.g ponzi investment on capital investments) is the moment you run into trouble with a flat demographics the machine is out of debt fuel. These numbers lend themselves to the demographics led narrative.

Anonymous said...

I can look at this demographic idea another way and agree that the boomer generation is a significant undercurrent - in that they are the generation in the upper management and policy making positions. their group is significantly represented in the corner offices, the board rooms and, indeed, now... in the headlines.
but I can't see just the quantity of them, nor the percentage quantity of them as being significant, nor do I think their sheer numbers were the driving force of economic expansion. (you need more than just mouths to feed in order to grow).
my (right now) thinking is crises like this come and go as does (and perhaps in sync with) group memory.
when I was beginning my adult life wall street was crashing (early 70's). 14 years later it was booming. 14 years later a minor crash. 14 years later a boom...
when I was starting out the wall street crash meant little to me and I was totally unaware a few years later when I purchased my first house that 14% was an outrageous mortgage rate! ... just as today my kids, now into their early career years, are not worried about unemployment and just as unaware that a 5% mortgage rate is a screaming deal!
group think, group memory, group headlines - heard mentality... mass media... and the boomers today are running the editing desks, assigning the camera crews, writing the opinion pieces and manning the talking-head chairs. but that's their role as determined by nothing more than their passage through life. the older guys more often than not move into positions of influence. it just happens that now, it is the boomers in those positions.
2 more cents worth. again, over priced.

by the way - I stumbled onto your blog a couple of weeks ago. I quite enjoy it. the combination of you two, your different interests and your accomplished expression. very nice. thanks. and I apologize for this "anon" thing, but I really don't want to sign up for a google/blogger - what ever that is.
so... as not to be rude... I am Tom. I'll be reaching 60 years in a few months. I have 2 children in their 20's, a few nephews and nieces in their 30's and I've been married for 36 years to my high school sweet heart. my wife still loves her career (creating education courses for an int'l for profit education co, and I love not being a graphic designer anymore). the best part so far was being a dad. absolutely the best part. I hope you are enjoying your turn in the docket.