A recent article in The Economist made some rather ambiguous claims about baby boomers like me:
Now that the generation is moving into retirement, what are they going to do with their money? The question matters for more than just suppliers of cruises and golf clubs. Boomers have deep pockets, so their spending choices will exert a huge influence on global economic growth, inflation and interest rates. And it turns out boomers are remarkably stingy—not just in America but across the rich world. They are not spending their wealth, but trying to preserve or even increase it. The big question for the economy in the 2020s and 2030s will not be why boomers are spending so much, as many had anticipated. It will be why they are spending so little.
I suppose that I am one of those “stingy boomers.” Before writing this post, I decided to check to make sure that I knew the definition of “stingy”. Here’s a definition provided in an online dictionary:
unwilling to give or spend; ungenerous.
OK, now I’m totally confused. Which is it? Unwilling to spend? Or ungenerous? I regard people who spend as selfish, and people who are unwilling to spend as generous.
The Economist also uses the term “miserly”, which is every bit as ambiguous as stingy:
Our analysis suggests that the wealth-decumulation puzzle is becoming still more puzzling, for boomers are more miserly than previous generations.
Think of it this way. You have X dollars of total wealth. You can spend the money on consumer goods, in which case you benefit. Or you can refrain from spending the money (i.e. save), in which case someone else benefits.
In the article, the Economist claims that high levels of boomer saving will tend to depress interest rates (which is plausible) and will also tend to depress inflation (which is highly dubious.) But they ignore the most important effect; it would boost economic growth and raise the living standards of millennials and zoomers.
PS. A new WSJ article has exactly the opposite view. They claim that a surge in spending by boomers is driving the economy:
‘We’re Not Dead Yet.’ Baby Boomers’ Good Times Drive the Economy.
Sky-diving, concerts, classic cars. An influx of older Americans bolsters the nation’s fastest-growing city. ‘We have more fun than our daughter.’
My conclusion? Don’t trust a reporter’s generalization about the economy—look at the data.
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