3 ms·

Can you elaborate? Why does Boomers' retirement lead to a credit crunch?

by gyulai 4y ago

belval 4y ago
Baby boomers life savings are still mostly in retirement funds being used to finance various ventures to get a reasonably good ROI. As the generation ages, the more money will be taken out of those accounts with fewer people to put their new earned money in the fund. Thus causing a credit crunch. Demographic problems are a bit of an everything problem though. EDIT: My answer above is somewhat wrong because of how much immigration the US is getting, the pyramid actually looks fine: https://en.wikipedia.org/wiki/Demographics_of_the_United_States#/media/File:USA_Population_Pyramid.svg https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta... Compare that to the Canadian pyramid: https://www.populationpyramid.net/canada/2020/ https://www.populationpyramid.net/canada/2020/
- staticman2 4y ago
  Investing in typical stocks doesn't directly fund anything, you buy the stock from some other private party. No funds go to the company itself. If you believe you can predict stock market returns from demographics you should form a hedge fund.
  - belval 4y ago
    > Investing in typical stocks doesn't directly fund anything, you buy the stock from some other private party. No funds go to the company itself. Of course it does, buying a company's stock raises it's value, making it easier for a company to raise money by issuing more stocks instead of financing itself through taking on debt. > If you believe you can predict stock market returns from demographics you should form a hedge fund. Believing that the market is impacted by demographics does not really give you an alpha to use when investing, slower growth in the next ~30 years is just a trend.
    - dehrmann 4y ago
      > raise money by issuing more stocks How often does this happen?
    - staticman2 4y ago
      " Of course it does, buying a company's stock raises it's value, making it easier for a company to raise money by issuing more stocks. " Many companies are buying back stock (i.e. doing the exact opposite of this) Since the topic is intel, please explain when Intel last issued new stock and why they couldn't simply end dividends instead. (Giving money to their investors is the exact opposite of raising money). "Believing that the market is impacted by demographics does not really give you an alpha to use when investing" If you think stocks will be impacted by demographics you should be able to tell us what the correct price to earning ratio is of the S&P giving demographic a, b, or c and we should be able to trade based on that information when the S&P is mispriced. If you can't do that, your ideas are not provable or disprovable and are not particularly compelling.
sbierwagen 4y ago
Imagine a country of a hundred 18 year olds. They all get jobs on the same day, and start putting savings into the bank. The bank takes those deposits and loans them out to various productive (profit producing) enterprises. Time passes. The hundred all turn 65 on the same day, and retire. The savings rate whipsaws, since nobody is depositing money anymore, and is instead withdrawing it. The bank can no longer make loans. Credit crunch.
- whatshisface 4y ago
  Then the central bank sees that inflation is lower than they want and then lowers interest rates, solving that part of the problem.
- MacsHeadroom 4y ago
  US lending banks have had a reserve requirement of 0% since 2020. We are already in the days of cashless credit creation. No drop in savings will effect lending so long as this policy is in place.

Can you elaborate? Why does Boomers' retirement lead to a credit crunch?

by gyulai 4y ago

Can you elaborate? Why does Boomers' retirement lead to a credit crunch?

Baby boomers life savings are still mostly in retirement funds being used to finance various ventures to get a reasonably good ROI. As the generation ages, the more money will be taken out of those accounts with fewer people to put their new earned money in the fund. Thus causing a credit crunch. Demographic problems are a bit of an everything problem though. EDIT: My answer above is somewhat wrong because of how much immigration the US is getting, the pyramid actually looks fine: https://en.wikipedia.org/wiki/Demographics_of_the_United_States#/media/File:USA_Population_Pyramid.svg https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta... Compare that to the Canadian pyramid: https://www.populationpyramid.net/canada/2020/ https://www.populationpyramid.net/canada/2020/

staticman2 4y ago
Investing in typical stocks doesn't directly fund anything, you buy the stock from some other private party. No funds go to the company itself. If you believe you can predict stock market returns from demographics you should form a hedge fund.
- belval 4y ago
  > Investing in typical stocks doesn't directly fund anything, you buy the stock from some other private party. No funds go to the company itself. Of course it does, buying a company's stock raises it's value, making it easier for a company to raise money by issuing more stocks instead of financing itself through taking on debt. > If you believe you can predict stock market returns from demographics you should form a hedge fund. Believing that the market is impacted by demographics does not really give you an alpha to use when investing, slower growth in the next ~30 years is just a trend.
  - dehrmann 4y ago
    > raise money by issuing more stocks How often does this happen?
  - staticman2 4y ago
    " Of course it does, buying a company's stock raises it's value, making it easier for a company to raise money by issuing more stocks. " Many companies are buying back stock (i.e. doing the exact opposite of this) Since the topic is intel, please explain when Intel last issued new stock and why they couldn't simply end dividends instead. (Giving money to their investors is the exact opposite of raising money). "Believing that the market is impacted by demographics does not really give you an alpha to use when investing" If you think stocks will be impacted by demographics you should be able to tell us what the correct price to earning ratio is of the S&P giving demographic a, b, or c and we should be able to trade based on that information when the S&P is mispriced. If you can't do that, your ideas are not provable or disprovable and are not particularly compelling.

sbierwagen 4y ago

Imagine a country of a hundred 18 year olds. They all get jobs on the same day, and start putting savings into the bank. The bank takes those deposits and loans them out to various productive (profit producing) enterprises. Time passes. The hundred all turn 65 on the same day, and retire. The savings rate whipsaws, since nobody is depositing money anymore, and is instead withdrawing it. The bank can no longer make loans. Credit crunch.

whatshisface 4y ago
Then the central bank sees that inflation is lower than they want and then lowers interest rates, solving that part of the problem.
MacsHeadroom 4y ago
US lending banks have had a reserve requirement of 0% since 2020. We are already in the days of cashless credit creation. No drop in savings will effect lending so long as this policy is in place.