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The Demographic Key to US Economic Exceptionalism

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“Economic Exceptionalism” has been the catch phrase on Wall Street and Washington DC for two years, now, but it looks as though the myth of Economic Exceptionalism is just that – a myth. as pointed out by Geopolitical Scientist Peter Zeihan that the US is currently in fact enjoying a perfect storm in demographics.

It is demographics that have been driving US growth and investment since 2008. 

While there is talk about President Trump, Speaker Nancy Pelosi and the freshmen, Alexandria Ocasio-Cortez and Omar, keep in mind that the true drivers of the US economy are not these elected officials who are engaging in “advanced Greek political theater”  but the macro driver of consumers and investors – or more to the point the demographic pyramid.

In fact, it is this perfect storm, or Economic Exceptionalism is the result of the current demographic peroed and it, not any politician that has energized the US economy. From a broad strategic and very macro position, the Millennials and the Boomers provide 150 million consumers and investors – and they are both very active now.

THIS IS DRIVING THE US ECONOMY, NOT  Polticians. Though they try to take credit for it. 

Currently, despite the ongoing posturing by the Obama camp and the Trump camp on who deserves credit for the economy, it is those over 55 years old,  those under 45 years old who now make up a perfect mix of savers and consumers, and this is a matter of demographic luck.

Whenever the demographics favor a large cohort of people under 45 years old,  its a consumer lead economy with heavy and nonstop spending on kids, education, housing, cars, vacations and and other consumer goods. And Americans love to spend, most are addicted to it in fact, whether they have the money or buy everything on credit !

But Millennials are still mostly a young cohort, so their incomes have yet to expand to match their needs. Thus they have loans, student loans, car loans, mortgages and as a result this economy sustains high growth via high debt.

It requires a robust and free financial system, and the cohort of retiring and soon to retire Boomers, while having tapered their consumption, are ready to invest in everything under the sun in an attempt to ensure their financial safety through retirement

In short, these Boomers are providing the finance and liquidity for the youth to spend, spend, spend. And as a result, the US is currently benefiting from the perfect mix of Boomers, Generation X and Millennials. 

The US Millennial population is massive – Currently there are 83.1 million millennial in the US who are engines of growth for both the US domestic economy as well as international economies such as Japan, Germany, China and South Korea.

One can easily say that the reason the US has avoided economic catastrophe from 2008 to 2018 is the spending habits of those between 30 to 50 years old as currently the nation is on spending spree unheard of in the last 50 years.

No, it was not President Obama nor President Trump, it was you and me who should be thanked. Not them. Neither of them. 

The Baby Boomers are in the 55 to 75 year old range with many investing in stocks and bonds, many who have seen their kids off to university for the most part, have excess capital to spend and invest. Capital costs are low as a result.

So the so-called Economic Exceptionalism that the US is now enjoying is not the work of Obama, Trump, nor the policies of the Democrats or Republicans, but the lifestyle habits of Boomers, Generation X and Millennials who spend and save unlike no other generations in US history.

Finally, when it comes to energy security, food security, demographics and geographic strategic advantage, the US is now better positioned than Japan, China, Germany and many other countries – and it is more because of luck than anything else.

 

 

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