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Boomers’ Youthful Impression

07/15/2017

Generalizing, the “greatest generation” makes the assumption the economy is weak and weakening, which reflects their youthful impressions during the Great Depression.  Baby-boomers make the assumption that inflation is wracking the economy, which reflects their youthful impressions during the late 1970’s and early 1980’s.  Millennials/Gen X’ers make the assumption that the economy can never be trusted, which reflects what happened to their parents during the Great Recession.  Only technology can be trusted.

Focusing on the Baby-boomers, just try telling them that inflation is non-existent.  The popular Consumer Price Index continues to run about 1.6%.  Stripping out energy and food, it is even less.  In February, it was 2.7%.

The only sectors showing any inflation are the usual suspects, i.e., health care and rent.

So, if inflation is non-existent, why talk about it?  Because that largely drives the decision to raise interest rates by the Fed.  At the beginning of the year, Wall Street expected four rate increases this year.  It got one and now expects only one more this year.  Savers can expect little relief from the low rates.  Savers lose if we do have inflation, because the purchasing power of their savings is reduced.  And savers lose if we not have inflation, because their interest income is stagnant.

Sorry, Baby-boomers, but you cannot complain about inflation.  Of course, you could complain about the low interest rate on your savings accounts.

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