Editor’s note: This is a lightly edited transcript of the accompanying video from professor Peter St. Onge.
Or, more precisely, why are subsequent generations so poor? This might look mysterious, considering how irresponsible boomers are, compared to their parents.
But it turns out the answer’s simple: It’s because they rode the big, beautiful economy they inherited, then they broke it.
MSN put out an article trying to figure exactly how boomers got so rich.
In short, it comes down to three things—killing economic growth, decades of artificially low interest rates, and soaring prices as cronies abuse the political system to push up the price of everything from college to hospitals.
First up, economic growth.
In the 1950s and ’60s—before President Richard Nixon killed the gold standard and unleashed permanent inflation, real annual growth in the United States averaged 4.4%. That’s enough for your kids to be three to four times richer than you, which was standard.
Post-Nixon—from the ’70s to the ’90s—growth fell to just 3.2%, down by one-third.
Then, since 2000, it collapsed to just 2.1%. Half.
I’ve talked about the post-2000 productivity collapse in recent videos, but in short, it was driven by surging government spending and regulation—roughly, double the previous level of spending, even worse on job-killing mandates.
The growth slowdown has done two things. It slowed wages to a crawl. Kids are no longer three to four times richer than their parents. And it forced companies to ditch benefits they couldn’t afford. Namely, generous defined-benefit retirement plans.
So, while boomers pulled the economic ladder up after them, they themselves got rich, thanks
to that second reason: cheap interest rates.
As bad as low rates are for economic growth, the one thing they do is pump your bags. (Bags being the term for heavy investments in magic internet money, per the UrbanDictionary.)
From housing to stocks to collectibles, when interest rates are low, the price goes up. Combine that with the way the Fed prints money, by injecting it into financial markets, and it’s been an absolute bonanza for anybody who owned anything. Which is old people.
Finally, the third reason: the cronies.
In 1970, tuition at a public university cost $394. Today, according to a study by Self Financial, the average college degree costs $307,658.
Of course, health costs are even worse, where you’ll pay $100,000 for leg surgery or the famous $629 Band-Aid at one Connecticut hospital.
More than 20 million Americans are carrying medical debt—roughly $220 billion of it, according to the Kaiser Family Foundation, and much of it crippling.
From college to hospitals, sophisticated lobbyists and their useful activists got hold of a critical industry and used insurance, treatment mandates, and anticompetitive regulations—especially so-called certificate of need laws in hospitals—to drive the prices to nosebleed levels.
In the case of education, that’s left subsequent generations starting the race $300,000 in the hole.
In the case of medical, it’s meant that, for millions of Americans, if you draw a bad card or get hit by a drunk, you’re out of the game for good.
So, what’s next?
If boomers made out because of slow growth, artificial rates, and being lucky enough to be born before the cronies, it gives us a very handy road map how to reverse it:
First, roll back the taxes, mandates, and regulations that are strangling the golden goose—namely, the ones that punish work and entrepreneurship, and that feed the crony takeovers with government spending and mandates.
Second, get the Fed out of the boom-bust inflation-recession cycle. It should either have a single mandate—safeguarding the dollar—or it should be shut down and replaced with gold that actually did the job and did it for free.
Read the rest of the article with charts and all the gory details at Profstonge Weekly | Peter St Onge | Substack
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