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Have you hugged a boomer today?

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Thank boomers for periods of low market volatility? Actually, yes. As Newsweek notes, there was a glorious time between the mid-1980s and 2007 when inflation was low, economies boomed, and recessions were short and infrequent. Economists have wracked their brains trying to explain this period of time. Some attribute it to the rise of China and India, which fed the world with low-cost goods. Others say it was Alan Greenspan’s skilled manipulation of interest rates. Others think it was just blind luck. Now, two economists at the Minneapolis Federal Reserve say we have baby boomers to thank. According to the economists:

“We find that demographic change accounts for roughly one fifth to one third of the moderation experienced in the U.S. Clearly, demographic change is not the sole factor responsible for this episode; nevertheless, demographic change constitutes a common factor relevant for understanding the evolution of business cycle volatility — not only in the U.S., but also in other G7 countries — over the past four decades.”

In other words, as the article explains, age profiles had a lot to do with this long period of low volatility. The authors point out that young people are extremely susceptible to business cycle fluctuations. When the economy turns south, they lose their jobs faster than everyone else, since they’re seen as inexperienced and often transitory labor. Middle-aged careerists are less expendable, both because of their social situation (families to take care of, mortgages to pay) and their on-the-job experience, which is more highly valued in a soft economy.


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