Retiring Boomers are Deflationary, Right?

The comments below are an edited and abridged synopsis of an article by John Rubino

There’s never been a generation as influential as today’s baby boomers, so the mass retirement over the next decade should, in theory, be a big deal.

Retiring Boomers are Deflationary, Right? | BullionBuzz | Nick's Top Six
Baby Boomers enjoying retirement on the beach

One scenario has us selling our stocks and either spending the proceeds or moving them into less risky assets like bonds and cash. This reverses the past few decades’ upward pressure on stock prices and sends them down hard. At the same time, we downsize our living arrangements, swapping multi-story McMansions for smaller one-story homes conducive to aging in place. Large house prices, as a result, plunge.

Rubino provides a link to a presentation by Harry Dent, a well-known proponent of the demographics-as-destiny idea and says his ‘demographic cliff’ is both logical and ominous. Apparently it’s not the mainstream view, however, as supported by a recent article (link provided) posted by the Wall Street Journal.

The idea of an aging society being inflationary because of low saving rates seems to ignore the much bigger forces now at work in the fiat currency world.

It’s more likely that the soaring cost of retiree healthcare would lead governments to run massive deficits and then lean on central banks to finance this debt tsunami with a commensurate amount of newly created currency… that would be inflationary.

And that’s exactly what is happening right now. So yes, Boomer financial behaviour might eventually turn deflationary. But governments’ response to this change will be wildly inflationary. This brings us back to the sound money community’s assumption that massive debt begets unrestrained currency creation begets financial instability.

Put another way, we’re screwed however it plays out.

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