The Anti-Boomer Manifesto
From Anti-Capitalist and Anti-Racist to Anti-Boomer
In this essay, I will posit that it is not the "capitalist exploiters" nor the "privileged white elites" nor "the Chinese" nor even the Midwest "deplorables" / “woke coastal snowflakes" on the other side of the political divide, but the slightly hunched older gentleman with a fragile tuft of white hair fumbling for the remaining 8 cents of change in front of you at the K-Mart checkout line who is the source of your greatest frustrations.
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The youth are right to be angry. Real wages have stagnated since 1971. The cost of housing has risen to prohibitive heights. Family formation has stalled, partially due to economic constraints. The heartless gears of "capitalism" restored as choice punching bag for rising adolescent discontents. Young people across the west are turning towards activism to voice their frustrations in favor of a more fair and just society.
While the frustration may be warranted, I believe it to be largely misplaced.
Where as blue collar workers rightfully diagnosed corporatist-driven globalization as a key input to their woes, young people have focused their energy on a novel flavor of "oppression": one based on race and identity.
In my opinion, this is primarily misdirection; the culture war as a convenient distraction from the real economic exploitation underway: The generational struggle between boomers and the youth.
And the youth are getting skinned. They just can't seem to figure how or who or why and so they flail about, blindly, grasping for scapegoats in marxist theory or anti-racist dogma - while getting fleeced by politicians on both sides of the aisle.
A CHINK IN DEMOCRATIC ARMOR
In the west, we often hold liberalism and democracy to be symbiotic. In fact, the very definition of liberalism - "a political and social philosophy that promotes individual rights, civil liberties, democracy, and free enterprise" - includes the promotion of democratic forms of government. These two unquestioned pillars of the modern west are so enmeshed and representative that we call these countries "liberal democracies".
Of the pair, "Democracy" tends to receive more attention. The defining innovation at the center of the great American experiment: binding those in power to the will of those they serve. However, the first word is equally, if not more, important. The American experiment and its imitators have proven successful precisely because its founders were equally wary of tyranny from below as they were from on high - disdaining both the absolute monarch and the tyranny of the majority. A majority held in check by a constitution, laws, and a judiciary protecting against infractions on individual rights and minority interests.
If I am a Muslim in the United States, I have a right to practice my religion without persecution even if 99% of the people in my state are Christian and would vote to ban the practice of Islam.
If my neighbors collude to vote that my house is no longer my house and split the proceeds, property rights come to the rescue.
Overall, the system has proven fair and resilient, walking the delicate high wire between individual rights and democratic representation. Democratic majorities keeping a check on elected officials while liberal principles underpin laws which protect minority interests against a corrosive majority. Beautiful when you think about it.
However, one important minority group appears to have been overlooked.
Yes, I know, democratic institutions have been infiltrated by no shortage of special interests and corporate lobbyists and "SuperPACs" and "foreign interference", and I'm all in favor of getting "money out of politics" and banning Russian bots. But I actually think these are relatively smaller issues. As someone <35, my primary concern is the institutional capture of democratic institutions by an increasingly tyrannical majority: the boomers.
Whether right or left, we have octogenarians voted in by septuagenarians - the only thing they can seem to agree on (yes, if its Trump or Bernie or Biden) is larger fiscal deficits - more spending today to prop up my assets and lifestyle at the expense of tomorrow.
THE BOOMER GRIFT
I’m not really sure it’s a grift per say… more just elderly folks exercizing their democratic rights in line with their economic interests in mature, rich societies who have collectively decided they would rather not have the elderly destitute and without healthcare and are willing to stomach the future economic repurcussions to ameliorate these discomfort today… BUT this is the anti-boomer manifesto, dammit!
So yes, the essence of the boomer grift:
Entitlement spending (social security & medicare / medicaid and other healthcare expenses) makes up ~46% of government spending
Boomers are still the largest cohort of voters making cutting entitlements political suicide
Rising deficits have driven government debt / gdp ratio to 120%
With elevated debt levels, the government will use central bank intervention (“quantitative easing”) to keep a lid on interest rates
Artificially low (real) interest rates inflate asset prices
Asset prices outpace GPD growth / income growth, meaning avg young people working for wages / salary can buy less with their money, falling further and further behind the rise in assets
Even weirder, we tax income higher than capital gains - further hindering those who hope to work hard to "catch up"
Because the system seems "harsh and rigged and unequal" politicians who promote more spending / social programs to "soften the blow" of capitalism's sharp edges continue to be popular with the young people who care enough to vote
This encourages more spending, higher debt ratios, lower real rates, and higher asset prices.
This spiral is brought to you by boomers everywhere; sanctioned by millennial apathy. I wonder when more young people will start paying attention.
FINANCIAL REPRESSION 101
Unfortunately, to pay for this institutional capture, the options for millennials and Gen Z are unattractive. Either higher taxes (not very popular...) or (more likely) - negative real interest rates.
For the non-financially inclined, this means, at some point in the future, inflation will need to run above the rate of return on government debt for an extended period of time. Those who watch financial markets can already see the equity risk premium (i.e. the amount of capital return paid to equity holders to justify the risk above "risk-free" government bonds) shrink to the lowest levels since 2000. Despite short term fluctuations driven by the credit cycle, my bet is this will continue lower in the decade ahead.
The political will, subject an iron boomer veto, has no intention of reducing deficits. Examining the record high debt / gdp ratios, the only real way to deal with the debt is to inflate it away. (i.e. To have inflation > interest rates on government securities). The problem is: who will want to hold government bonds when inflation > the interest rates? (i.e. you are guaranteed to lose purchasing power over time).
One safe haven is hard assets (gold, commodities, etc). Another option is pushing out the risk curve into equities. Another is exiting the system altogether into one without the same leverage constraints (bitcoin, crypto-assets etc).
Unfortunately, this puts the boomer grift in danger. The boomers don’t like that.
DEMOCRACY VS. LIBERALISM
As more people begin to look at the math…
this conflict will shine a bright light on the tensions inherent in democracy and liberal principles. The tyranny of the aging democratic majorities against the liberal ideals which supposedly underpin the west.
The interesting thing about crypto is that it is not "democratic" at all, but it is intensely liberal: baking the foundations of property rights, rule of law, and individual liberties into the fabric of the internet, accessible to anyone on earth aiming to avoid incompetent fiscal management, corrupt or arbitrary legal systems, or authoritarian regimes - even against the wishes of the majority.
The debate will come down to this: are liberal democracies more (small l) liberal or are they more democratic?
To sustain the boomer grift, governments would likely need to resort to capital controls (see China) to stop capital seeking positive real return environments offshore. Capital controls are quite contrary to liberal ideals, not only restricting free enterprise, but in an era of software-based money, enforcement would require Orwellian, Great Firewall-type surveilliance.
We are witnessing this tension play out in the US court system right now. US government agencies, ultimately responsible to their key democratic constituents (the boomers) are harassing crypto exchanges and protocols to clamp down the exits, but are running up against the protectors of individual / minority rights (the judiciary).
My own view is that the founding fathers were brilliant to craft a system which constrained the power of the oft corrupt elites by the less privileged majority, while enshrining rights to protect the minority from the same empowered majority.
Unfortunately, there appears to have been one minority group overlooked across the temporal axis: the youth.
I guess the rather anti-climatic point here is that perhaps young people are not being screwed by "systemic racism" or the "exploitative capitalist machine", but simply by your grandmother sitting at home in her recliner with an "I've voted sticker" while she watches Cheers reruns.
Ya, I know, it doesn't really instill the same fervor as "Viva La Revolucion!" or social justice warring, but… deep breath…. what if one of the largest causes of millennial / Gen Z frustration and inequity is just the annoyingly simple, unexciting fact that societies are… getting old?
Market-oriented / liberal societies have been a massively successful experiment - industrializing and making constituents rich
That rich, industrialized societies make kids more expensive and give women more opportunities outside of home / baby-making
That the subsequent inverted demographic pyramid leaves democracies susceptible to fiscal demise by tens of millions of silver-haired votes…
As we head for a rematch election between two ancients in November, just remember - the game is rigged: you lose either way.
Millennials of the world have nothing to lose but their debts! They have financial freedom to gain! Millennials and Gen Z'ers of aging liberal democracies with no prospects of buying a home or starting a family and awaiting the looming financial repression with a sort of bored, stoic apathy, UNITE!!