Population time bomb part two

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‘The figures in this story are worrying, because they will affect everybody in years to come…’

Economic stories have always featured strongly for our Editor, Welshman Phil and new figures today which could affect all our futures are puzzling economists, showing that one rich section of our growing population is refusing to spend its money. 

 

It might seem as dry as dust, but EVERYBODY should be alarmed…

A population which is growing not declining (in proportionate terms) is good for the economy – but one part of it has left economists stumped.

‘We’re in luck!’

They can’t work out why one huge chunk of the population, which lucked out after the Second World War and is richer than the others, is not spending the money that has been accumulated over the years.

Baby-boomers.

Baby-boomers were born between 1946 and 1964, and, taken together, they are the luckiest generation in history. Most of the cohort, which numbers 270 million across the rich world, grew up during strong economic growth.

Baby-boomers aren’t spending the money they have amassed, and economists are puzzled

Not all are rich, but in aggregate they have amassed great wealth, owing to a combination of falling interest rates, declining housebuilding and strong earnings.

American baby-boomers, who make up 20 per cent of the country’s population, own 52 percent of its net wealth, worth $76 trillion.

But analysis suggests that this lot are even more miserly than previous generations.

Investment managers have created indices that track the share prices of firms which do well when oldies spend big.

One index produced by MSCI, a data provider, includes companies that provide treatments for age-related diseases, leisure and tourism, and anti-ageing skincare products.

‘YOU’RE not getting it!’

In the past five years the index has underperformed the stockmarket, returning one percentage point less a year on an annualised basis.

In the USA in 1995, 46 per cent of retired households claimed to have saved in the past year, but by 2022, 51 per cent of retired households did.

In Canada it is much the same.

‘I’d rather keep my money down the back of the sofa than spend it!

In South Korea from 2019 to 2023 the saving rate of over-65s jumped from 26 per cent to 29 per cent, a bigger rise than in other age groups.

In the UK retirees are spending an ever-smaller share of what is coming in – they prefer to save instead.

In Australia in 2022 it was similar – people there saved 14 per cent of their income.

In Germany from 2017 to 2022 the saving rate for retired folk rose from 17 per cent to 22 per cent, and in Japan the old-age saving rate is soaring.

‘We’re fitter than ever, and richer than ever!’

Pensioners account for about 40 per cent of total consumer spending in Japan, less than they did a decade ago, even though there are far more of them.

All of this has left economists scratching their heads – they have a simple model of how people spend as they age.

In old age they spend more than they earn, funding their lifestyles by selling capital (such as houses) and eating into savings.

‘I’m keeping this to myself…’

What is happening appears to be bucking the trend, and all of us should be worried!

 

Some of the stories Phil has covered during his career (when financial figures which could affect everybody’s future were ALWAYS reported), as he was gripped by the rare neurological condition Hereditary Spastic Paraplegia (HSP)have been released in a major book ‘A GOOD STORY’. Order it now!

‘BUY MY BOOK!’

Regrettably publication of another book, however, was refused, because it was to have included names.

Tomorrow – why for Phil watching political risks being taken has always fascinated him, and today there is more evidence of this!