"The economic legacy left by the baby-boomers is leading to a battle between the generations"

[applegrove]

The economic legacy left by the baby-boomers is leading to a battle between the generations

at the Economist

http://www.economist.com/node/21563725

"SNIP...................................................

That leaves a third possibility: inflation. Post-war inflation helped shrink America’s debt as a share of GDP by 35 percentage points (see article). More inflation might prove salutary for other reasons as well. Mr Rogoff has suggested that a few years of 5% price rises could have helped households reduce their debts faster. Other economists, including two members of the Federal Reserve’s policymaking committee, now argue that with interest rates near zero, the Fed should tolerate a higher rate of inflation to speed up recovery.

The generational divide makes this plan a hard sell. Younger workers are typically debtors, who benefit from inflation reducing real interest rates. Older cohorts with large savings dislike it for the same reason. A recent paper by the Federal Reserve Bank of St Louis suggests that as a country ages, its tolerance for inflation falls. Its authors theorise that a central bank could use inflation to achieve some generational redistribution. Yet pressure on the Fed to cease its expansionary actions has been intense, and led by a Republican Party increasingly driven by boomer preferences.

The political power of the boomers is formidable. But sooner or later, it cannot escape the maths.


...................................................SNIP"

[NYC_SKP]

1. To be sure, Romney is pitting current retirees against future generations on Social Security issue.

ratfucker.

[NBachers]

2. Yeah, I've really been nostalgic for some good old-time inflation.

[applegrove]

3. The rich are currently fighting inflation in the USA by keeping the unemployment rate

high. Sure they run as 'job creators' but they are really happy with the current trade off, where they have everything going their way: markets up and lack of inflation/jobs.

[applegrove]

6. Even if the fed & government keep fighting inflation there should be some

acknowledgement of how the worker is actually the one who is doing all the inflation fighting that helps the rich. The rich think they build everything. I don't actually expect any responsible government to pump up inflation. But there should be some acknowledgement that the poor fight inflation with their very own unemployment.

[BeyondGeography]

4. So a certain group stands to take in $333 billion more

than it paid in, and that's over many years. Meantime, the national debt is $16 trillion. Not a word in the article about how we got to that figure (hint: Carter left Reagan a $900 billion debt, he tripled it and off we went). Of course, that would have gotten in the way of their gloating, inter-generational warfare bullshit.

[raccoon]

5. Divide and conquer---a tried and true strategy. Bookmarked to read later. nt

[bemildred]

11. Yep, we can't go after women, gays, or minorities, let's set the generations against each other.

"Baby Boomers" are just people born between two arbitrary dates.

[HooptieWagon]

7. Deflation stagnates the economy.

A low rate of inflation is prefered to deflation and keeps the economy rolling. Too much inflation is bad... it devalues wages and destroys savings. About 2% is considered acceptable.

[applegrove]

8. I think inflation should be fought by slowing down the whole economy

for a bit. Like it was in the 1990s. That way the rich, middle class and the poor fight it alltogether instead of the way it has been fought in the last 4 years...with high unemployment amongst the middle class and the poor.

[HooptieWagon]

9. The goal is to keep it stable, with controlled growth.

If the economy were completely unregulated, it would cycle wildly in boom and busts. In a deflationary bust, everyone is going to sit on their money because its worth more in the future. Thus no spending or hiring that gets the economy moving again. A small amount of inflation encourages spending, which boosts the economy, while not discouraging saving.

[applegrove]

10. I concur.

[raccoon]

12. I've heard that, and never have gotten it. About a little bit of inflation being good,

I mean.

I get that deflation isn't good, why does it have to be one or the other?

Why can't prices just stay the way they are?

[HooptieWagon]

13. Because a balance between saving and spending is desired.

Onlythe prime rate and money supply are regulated, prices aren't. Thus, there may be inflation in one market segment, and deflation in another. At 0%, there is such a fine line that even a little deflation in one market segment might be enough to cause people to stop spending and put the economy into a recession. Of course, there is disagreement over exactly how much inflation is desired, but generally past history indicates an inflation rate of 2% results in steady economic growth while not discouraging saving.