The hyperinflation argument, part deux

Perhaps the current crises in housing/credit/derivatives/leadership/good governance are not the most important problems this country is facing- just the most immediate. Perhaps this is merely just the tip of the iceberg… and the future this country is facing is an increasingly downward slope. (Got snowbaord?)

For far too long we have conveniently ignored the demographic reality of a swelling tide of retiring of boomers (and we’re still giving it the silent treatment, officially). As the event horizon comes into focus, a harsh reality intrudes into this golden time-space.

Boomers retiring in ever- large, successive waves, will undoutedly have a very significant impact on aggregate investments and retirement accounts.

By cashing out and drawing down pensions and 401(k) accounts en masse… and with fewer able bodies left to support the Social Security/Medicare Ponzi scheme debt load… the only way to mathematically meet that promise at nominal value is to (brace yourself, Sheila) inflate. Of course, the wizards behind the curtain will likely overshoot and hyperinflation could very likely result.

Due to the political expediency of growing an economy out of the last Great Depression (GD1), perhaps politicians and policy makers didn’t have any interest in listening to the few actuaries who undoubtedly realized what the end game might look like. After all, they’d be long gone…  and who listens to actuaries?

If only…

Still, it was fun while it lasted… get ready, ladies and sperms, if you are in the camp which believe hyperinflation is the final leg down (or is it up?), then it’s nearing time to pay the piper!

Baby Boomers: It’s All Your Fault

The big question, of course, is what happens when boomers start to retire. The oldest of them became eligible for Social Security in 2008, and as we move forward in time, more and more of the bulge will switch from middle age — when they’re busy earning and spending — to retirement, when they start to draw down on their savings. According to the “age wave theory,” popularized by money manager Harry Dent in the late 1990s, when the boomers hit this transition point, the U.S. will enter a long bear market, as new retirees start tapping into their pension funds and 401(k)’s, selling their stocks and bonds to pay for their golden years.

Seen in this light, the credit boom and bust was almost an inevitable byproduct of demographics. As the boomers hit their peak spending and borrowing years in the late 1990s and 2000s, they splurged on second homes, SUVs, and went crazy on credit. At the same time, pension funds and retirement accounts peaked in size. There was more money than ever, since boomers had entered their final decade before retirement, and fund managers grew desperate to find attractive returns for the huge piles of cash they managed. Hence, when charming bank salesmen came bearing AAA-rated CDOs backed by subprime mortgages, it was an offer they couldn’t refuse. The subsequent crash marked the turning point, after which the boomers will buckle down, try to rebuild their nest eggs in the final years before retirement, and soon thereafter start to draw down on the assets they’ve accumulated over a lifespan.


I don’t have to tell you what happens when everyone wants to exit the market at once.

Proper planning prevents piss-poor performance.


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