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The movement of the massive Millennial generation into peak spending patterns is playing a major role in driving inflation, at least according to one investor.
“What everyone is not including in the conversation is what really causes inflation, which is too many people with too much money chasing too few goods,” Bill Smead, chief investment officer at Smead Capital Management, told CNBC last Thursday.
He said the last time the U.S. experienced such “wolverine inflation” was in the early seventies when 75 million boomers replaced 44 million silent generation members.
Now, a similar pattern is happening as an estimated 90 million Millennials replace 65 million Gen-Xers in the key 25 – 45-year-old age bracket. He said many Millennials postponed buying homes, cars and other life-stage items about seven years later than most generations.
Mr. Smead told CNBC, “In the past two years, they’ve all entered the party together, and this is just the beginning of a 10-to-12-year time period where there’s about 50 percent more people that are wanting these things than there were in the prior group. So the Fed can tighten credit, but it won’t reduce the number of people wanting these necessities in comparison to the prior group.”
In a blog entry for Advisor Perspectives, Mr. Smead pointed to other similarities to the seventies, including high federal spending to support the Vietnam War and sixties’ social programs, as well as skyrocketing energy prices tied to an oil embargo.
Among the factors taking the blame for the current spike in inflation is record stimulus spending as well as high energy prices due to Russia’s invasion of Ukraine which worsened a supply/demand imbalance caused by the pandemic.
Another factor cited for the current inflation woes includes general supply/demand imbalances as consumers look to spend their savings from the first year of the pandemic but find shortages in cars and other items due to supply chain disruptions, including recent lockdowns in China. Rising commodity and labor prices, as well as low interest rates amid the pandemic, are also often cited. More controversially, some blame profiteering as prices are marked higher than cost increases.
- The size of the millennial generation is to blame for sky-high inflation, strategist says – CNBC
- Inflation is a Wolverine – Advisor Perspectives
- What's causing inflation? One expert walks through some of the factors – NPR
- Here’s What You Need to Know About America’s Super-Hot Inflation – The New York Times
- The Fed Can’t Fix What’s Driving Inflation. But It Can Start a Recession. – Barron’s