Sunday, January 26, 2014

Generation Y Can Get Rich Too

"Listen to Paul Krugman - your 'favorite' economist; didn't I hear you say that?"

One of the more common lies that Echo Boomers hear which pertains to them is that they have little to no chance of ever becoming part of the top 20% like former American generations have. Of course, this is a media lie spouted by the New York Times over and over again, and finally, a new study shows that Generation Y can reach the top 20% just like former American generations could:

Instead, the study found that 9% of children born in 1986 to the poorest 20% of households were likely to climb into the top 20% — little-changed from 8.4% for such children born in 1971.

Now, for people who can do mathematics (sorry Americans), we can see that it's risen 8.4% to 9%! So why do Americans complain about "rising income inequality?" Well, remember, this involves understanding basic mathematics (new minus old divided by old multiplied by one hundred), so it will be completely lost on them. Back to Krugman's blog to complain about teh income inequalitiez, my dear Americans.

Saturday, November 23, 2013

Renting Beats Homeownership ... AGAIN

Remember the question Should I Rent Or Buy where I wrote that a person should only buy a home if at least three of the four apply to you:

  1. You plan to live in your area for a long time.
  2. You work at a safe job that's immune from economic problems (for instance, the medical industry).
  3. You want a specific home and you have no thought of selling it later.
  4. You love buying and selling real estate, so when you take a loss, you can't imagine doing anything else.

As it turns out, high levels of home ownership can spell bad news for the economy:

Rises in home-ownership in a US state are followed by substantial increases in the unemployment rate in the state, a fall in the mobility of its workers, a rise in commuting times, and a drop in the rate of new business formation. The authors are careful to check, and they replicate, their findings for different periods of US history. The release of their work coincides with a new European study, done independently, which draws the same conclusions. That research, by Jani-Petri Laamanen at the University of Tampere, follows the effects of housing market deregulation across the regions of Finland.

Of course, Echo Boomers won't be buying homes for different reasons: they don't have money.

Thursday, November 21, 2013

Millennials Don't Know What Inflation Is, So ...

A recent article suggests that Echo Boomers should oppose Janet Yellen if they want to retire. As a quick note, remember that Echo Boomers supported even though his Obamacare would cost them more money than if it didn't exist, so they seldoom act in their best interest. Likewise, Yellen (and Bernanke) is a disaster for most Americans, especially young Americans, but they won't vote or take action in their own interest.

From the article:

However, by all accounts, the Federal Reserve under her leadership would continue cycles of quantitative easing. Millennials are wise to oppose this policy, because negative interest rates will make it utterly impossible for any of us to ever retire.

This sounds true and great (and it is), yet how many Echo Boomers understand negative interest rates or inflation? Even if they do, how many of them would actually take action? And finally, how many Echo Boomers vote their pocketbook, as - if this was true - they would have voted against Obama. Even from several financial studies I've conducted (at Wells Fargo, through Twitter, and through web parsing), only about 10-15% of Echo Boomers actually know what these things are and would take action on them. The remaining focus more on whether they like the person; and let's face it Yellen and Bernanke are likeable people.

Acting against their interest is a trait of the majority of Echo Boomers.

Sunday, October 27, 2013

Higher Inflation Will Hurt Generation Y

But, as we can guess, that's what Bernanke and Yellen want! Yes, the Federal Reserve wants higher inflation, see this article:

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.


"Low inflation is not good for the economy because very low inflation increases the risks of deflation, which can cause an economy to stagnate," the Fed’s chairman, Ben S. Bernanke, a student of Japan’s deflation, said in July. "The evidence is that falling and low inflation can be very bad for an economy."

Not a problem for Echo Boomers? While many Americans won't understand (hint: many Americans suck at math and boast about it!), foreign readers and investors might want to see the below video of how destructive even 2% inflation is:

Note: I am not predicting hyperinflation; I do predict that if the Federal Reserve succeeds at raising inflation, they'll lose control of it much faster than they think. How high will it go? Unfortunately, that's impossible to predict.