The BabyBoomer SuperCycle was a unique period in history. For ~15 years from 1985 – 2000, it was the NICE economy – Non-Inflationary Constant Expansion. Nobody worried too much about politics. And vast areas of the world joined the global economy – East Europe, India, China and many others.
But “that was then”, and this is now. The subprime crash in 2008 should have taught us that the world could no longer run on auto-pilot. But policymakers chose to ignore my warnings and those of others who had pointed out that things had changed:
- 1946-64 had seen a 52% increase in US births versus the previous 18 years (77m v 51m)
- As the chart shows, the Under 25 and Wealth Creator 25-54 cohorts soared in size
- By 1980, there were 95m Under 25s versus 66m in 1950
- There were 86m Wealth Creators versus 64m
It is easy to look back today with hindsight, and understand that this boom inevitably had a major impact on demand levels.
But unfortunately, central bankers had instead taken the credit for the SuperCycle, claiming it was due to their genius in steering the economy.
So they essentially decided to try and “print babies” after the subprime crash, as I warned in the Financial Times.
Inevitably, this led to economic friction as their policies boosted asset prices at the expense of wages. Quantitative Easing and zero interest rates fueled massive speculative bubbles in stock and housing markets, as well as in areas such as cryptocurrencies, art, coins and many others.
As the Bloomberg chart confirms, the Top 1% of the US population were the great winners from the policy. They own ~50% of all equities, according to Federal Reserve data. All those people who owned houses also saw an increase in their wealth. But, of course, younger people who didn’t own either stocks or houses lost out from the bubbles.
And, unsurprisingly, it turned out that central bankers couldn’t solve today’s real-world problems. As we have been warning for over a year, inflation has been rising out of control due to the supply chain chaos caused by the pandemic, major energy price rises and Russia’s invasion of Ukraine.
Finally, central bankers are now having to give up on the asset bubbles they have created. Instead, they are having to start ‘normalising’ interest rates again – which will mean the asset bubbles are going to deflate very quickly.
Normally, this would have been bad news for the party in power. And certainly, the polls have been bad news for the Democrats for some time. 56% of Americans think President Biden is doing a bad job, compared to 39% in favour.
But now the Supreme Court has thrown the Democrats a lifeline ahead of November’s mid-term elections. As the Wall Street Journal’s map shows, large numbers of States are about to ban abortion:
- As the BBC note, this will impact around 40 million women of child-bearing age
- Many of them, and their mothers and grandmothers, will normally be Republican voters
Social and political issues were always more important than economics before the SuperCycle. And now they are resurfacing again. Does an individual woman have the right to choose what to do with her body? Or can judges tell her what she can, and can’t do? It is early days, but many women may choose to vote Democrat because of this issue in November.