(or, How to pass the Civilizational Torch From Baby Boomers to their Descendants.)

The problem of inheritance is another, where what is often referred to as the Grey Tsunami sees Baby Boomers allocating their wealth and accumulated capital to their own self-interest rather than bequeathing it to their successors. Part of this is ideological; for many Boomers the concept of inherited wealth elicits images of spoiled and undeserving trust fund kids. Dreams of egalitarian meritocracy drive their thinking: a fair and equal distribution guided by the invisible hand of the market, as opposed to the most competent child becoming the head of the household and its financial domain.

From the housing crisis to retirement demands levied to the taxpayers, younger generations seem to be laser focused on the wallets of their forebears. As a result, a palpable air of hostility has crept into the culture.

The youth are now tasked with asking themselves a series of questions if they are seriously approaching the topic of passing the civilizational torch: what do they believe Baby Boomers possess, compared to what they possess in reality? And once these are answered, what does the youth truly want their elders to do?

What is popularly known as “The Silver Tsunami” represents approximately $75 trillion of wealth that the Baby Boomers hold dominion over, and it sits at the heart of many of the financial issues facing the youth today. The maxim “a society grows great when old men plant trees whose shade they shall never sit in” seems to be absent in conversations of where this wealth shall be allocated, with consumer spending and gambling sitting high on the list. This is what many in the press are calling the spending gap.

Between most young people having 401k at work and the IRA they may have picked up at some point in their professional lives, they probably believe investing is what they must do to retire and beat inflation, even though their lying eyes have seen three “hundred year” market crashes in less than 20 years. A low-trust society is a huge challenge to the received utopianism of retiring with a fat bank account to enjoy one’s golden years in peace since it rests upon the overall stability of the market and the belief of cross-generational investment.

While Millennials and even Gen X are eager to discuss transfers of power, many Boomers are skipping their children altogether and honing in on about their youngest grandchildren. There is increasing trepidation from both ends of the spectrum concerning the future, at least from those seniors not committed to blowing all their money before they pass and younger generations not nihilistically checked out completely.

Retirement Planning 101 for Boomers is two investment assets: 401k/IRA (public securities) and home ownership. As an inflation containment/redirection policy, let’s say 10% of income from corporate payrolls are directed into these retirement accounts, which are then used in aggregate to push up stock share prices. While contribution (especially early contribution) is eagerly promoted, the sales pitch is more from the combined force of everyone else buying these stocks and pushing up prices. The theory behind retirement income planning is then a controlled sale – also known as a “glide path” – of those stocks to generate reliable and regular retirement income for the investors.

Wade Pfau’s reliable “4% Rule” was the expected norm calculated in the 1990s, which dictated that retirees could withdraw 4% of their portfolio’s initial value, adjusted for inflation, annually. When the stock market was rising, Boomers were entering their peak earning years and retirement was so plausibly close that Boomers started taking retirement savings very seriously. The gist of the 4% rule is that Monte Carlo simulations – an algorithm we run to forecast future trends – show a 99% likelihood that this withdrawal rate won’t go bankrupt for at least 30-40 years. In this sense, the plan based on this retirement savings strategy is always to go bankrupt, but to exhaust its purpose a few years before the point of failure.

As a backstop, Boomers also have their home equity to tap into, which is why reverse mortgages became so popular in the 2000s. The whole system is explicitly designed to exhaust itself, leaving nothing as a legacy for survivors, including children and sometimes even spouses.

Normally prices would go down as the sellers exceed the buyers, but it will be the same problem as Social Security — it makes sense only if the supply of workers increases, but as soon as the supply of workers decreases, the pressure mounts. If you’ve noticed a trend in wealthy Boomers taking a friendly stance on migration, this is a big part of the reason. The trade off with a cornered market is that prices can only be kept artificially high by constricting people’s ability to sell. 

Volatility can neither be created nor destroyed, only transferred. Suspending gravity and keeping the real estate and securities markets artificially high to maintain the expectations of an extended and comfortable glide path will result in liquidity problems for everybody else.

To put it simply, the Silver Tsunami is Baby Boomer wealth flowing to consumer spending, luxury activities, and any investment they can purchase to guard against the liquidity crisis looming in the background that threatens to destroy the entire system of financial security. What younger generations are proposing is therefore to remove capital from that system and invest it into an entirely different alternative, perhaps one that has a different view of retirement than that of a nonstop party, the antithesis to “life begins at retirement.”

It is a war between time horizons, and it is slowly dawning on Boomers that the planned demolition of their entire investment framework may truly take the rest of society with it, so the stakes of restructuring retirement and the perpetual investment into legacy are no less than the future of the economy itself.

To put it simply, Gen Z and Millennials proclaim that Baby Boomers are not passing down vital assets or opportunities, and as a result they feel compelled to seize it. This process cannot conceivably take place without each side interfacing with the other, a scenario either side struggles to accomplish. The most crucial starting point would be to bridge this chasm and get the ambitious individuals of both generations into the same civic spaces, especially those where power is brokered.

The world of patronage and power rests upon the vast tectonic plates of civil networks away from the prying eyes of mainstream society. Niall Ferguson showed the history of intellectual, revolutionary, and political networks that, prior to reaching the authority of total power, were often a salon culture of backroom connections and strategies. The success of these affiliation networks rests on their ability to connect with each other; a network of networks, each interlocked with individuals tasked with maintaining communication. Networks aren’t particularly good at connecting with each other naturally, but for those who want to enter into this world on a mission, they may very well be the types of super-nodes urgently needed.

Baby Boomers were the last generation to have a true affinity for clubs and fraternal networks, a phenomenon which which has degraded over successive generations. This was detailed in the landmark sociological text “Bowling Alone,” which tracked the decline of fraternal and civic organizations as the centers of leisure time for American men and women, with the bowling league as the illustrative example. A great deal of capital-owning Baby Boomers invest their wealth in these areas, creating behemoths lurking where few are currently looking. One strategy would be to assume control of these groups.

Examples of these would be churches, VA clubs, rotary clubs, masons, and other secret fraternities. Even historical societies like SAR and SCV are prime candidates. There is most likely a Chamber of Commerce in your area that is in dire need of attention and would leap at the chance to cycle in new blood. Are you a young upstart lacking the resume to stand out in these environments? Local gun clubs are fantastic ways to start building relationships over a shared interest, often geared towards ambitious minds. Most of these will not sound exciting or even relevant to the youth, and therein lies the problem.

The purpose of this endeavor isn’t to plant am individual behind the wheel of a massive monetary pipeline, it’s to teach capable people to survey their surroundings and act with immediacy, knowing each move brings us closer to victory.

The strengths of this approach are threefold: rapid return on time investment, access to significant funds, and high likelihood of long-term returns for the broader community. The weaknesses of this approach are also threefold: money in these organizations can only be used slowly and for specific purposes, time investment remains significant, and it requires personable and committed individuals to carry it out, often without compensation. To put it another way, you need young people with long time horizons to take on this task, not people looking for handouts.

The Boomers that remain in these organizations are panicked and starving for young leadership. If younger generations want to possess the torch, it may not involve grabbing it so much as the opening of palms. They will be surprised how many Boomers are very forthcoming with their influence if approached from someone who appears ambitious and above all else, genuine. One thing they will likely need immediate help with is anything involving computers. Do you know how to operate a social media account? Do you know how to turn a computer off and on? You just passed the test, the goal being to gain access to immediate

It is the in-person aspect that many Millennials and Gen Z might find abrasive, but it is non-negotiable. More than ever, individuals with access to capital want to meet in person. Many young digital nomads have bemoaned that their employers are demanding they come back into an office setting, and many working white-collar careers have been complaining that clients now only want to meet at conferences in major cities. Zoom is the new telephone in that people are avoidant of it now unless absolutely necessary, and pseudonyms in emails have become a red flag. Trust must be established the old fashioned way.

For many in the younger generations who have a bifurcated or even trifurcated online presence, crafting a persona to maximize returns in the real world may be an alien concept. For now, this is the best way to get one constructed. Baby Boomers have a valid point when they point out that nobody wants to take this low-hanging fruit, and it may boil down to people not understanding the basics of a dressing for the meeting and mastering the art of non-alienating small talk.

Owning a home on land no longer feels attainable for many young people, and the desire extends beyond the commercial value of property possession. Family, security, and sustainability branch from this nucleus and since 2008 the term “Housing Crisis” has seemingly remained top-of-mind for the entirety of society.

As Baby Boomers age and move to more senior-friendly housing or pass away, their homes will be inherited or, more frequently, freed up for purchase. But since that process will likely take up to a decade, millennials – who are in their prime home-buying years presently – will likely miss out on the tidal wave of homes hitting the market.

The U.S. housing market today is facing a shortage of homes as current homeowners hold out selling their current homes so they can hang onto mortgages with ultra-low rates. A lack of inventory is pushing home prices up, which alongside 30-year mortgage rates inching closer to 8%, is straining buying power. The refrain in the mainstream press is that we need more homes, built faster, and in larger numbers because we also have a mass migration crisis.

Those crossing their fingers for a new housing collapse similar to 2008 so they can scoop up foreclosures have been left with those fingers fused together. The surge of remarkable property expected primarily by Millennials simply isn’t manifesting. There are many reasons for this. Many Boomers whose homes have surged in value now face massive capital gains tax bills when they sell. Think of this as a tax on the profit you make when selling an investment or an asset, like a home, that has increased in value. Fewer older homeowners selling is part of what is keeping the inventory of homes historically low and pushing prices ever higher in markets across the US. On the flipside, older homeowners who want to downsize have been scared into staying put by how expensive a smaller home would be in the current market. Furthermore, Baby Boomers’ parents currently live in long-term care facilities, and many of them have a serious apprehension of experiencing that fate themselves.

While home ownership is trending up for both Millennials and Gen Z, they are in a race not so much against Boomers as they are the Boomers’ investment apparatus in the form of financial institutions tasked with keeping their primary clients in the black. Investment firms are becoming the most aggressive new buyers of U.S. homes — a trend that could make home ownership more difficult for average families.

In financial terms, the cratering of trust was achieved through collateralization of all lending — only Boomers who rode the wave up through buying in at the ground floor with real estate and publicly traded securities are able to participate. Two illustrative examples of this would be buying housing and mutual funds for retirement. Houses were cheap when Boomers bought them in the 1970s. The Employee Retirement Income Security Act (ERISA) wasn’t passed until 1974, so hardly anyone bought mutual funds until sponsored plans were part of company benefits packages. At the same time in 1978 the Great Moderation began, which describes the reduction in the volatility of business cycle fluctuations in developed nations compared with the decades before, meaning an increased equilibrium being reached and more stability. As credit became easier to get by increasing in supply contrasted against interest rates going down, the people who bought assets  like housing and mutual funds in the 1970s or early 80s saw their value skyrocket.

Put simply: this was the bubble that Boomers were able to get in on the ground floor of, but subsequent generations could only buy in one the prices were already high. Furthermore, the institutions holding their money have a stake in keeping players out of the game, as long as Boomer accounts stay booming.

An unfortunate future appears on the horizon where housing construction ramps up, but the quality and size of the homes are noticeably inferior compared to previous eras. You may have noticed the national conversation is “housing” as a commodity, not size or space or quality. Home ownership is a lot easier to achieve with poorly-constructed row house, or the Tiny Home trend that has failed to capture the imaginations of the youth. Think of the havoc caused by the sudden deployment of Covid-19 vaccines, but applied to what you thought might be a multi-generational home. A return to feudalism may be preferable to the alternative, where the value of the housing market continues to increase due to homeowners opting to unload property to high-paying financial firms as just another asset class, which will continue the liquidity of the market but further separate financial value from intrinsic or practical value.

The youth are therefore in a race against time to establish the intrinsic value of families living in a home of sufficient quality over the financial value offered by Blackrock or the Chinese Communist Party. This could take the form of grandchildren investing in renovating the homes of their grandparents with the agreement it would be passed down to them, while the home is built up to facilitate future generations and, most importantly, themselves rather than being dumped into a long-term care facility. This is one instance where the naked self-interest of the family could benefit all involved.

There is of course a political dimension to this problem, the solutions being policy proposals and government support. For this you need only understand the concept of “spigots,” which in this context refers to the flow of capital the government chooses to either release or close. The state opens the spigots over things it wants to support, and turns it off for things that it does not. These spigots, some believe, can be left open indefinitely if those in control so choose, examples of which being the military industrial complex, the welfare state, or pensions.

Put another way, “there is free money out there, you can just go out and grab it.” While there is truth to this sentiment, one must remain suspicious of anyone selling you on the rumor of goldrush.

For young people most likely on the political periphery, the primary issue is thinking in ROI (Return On Investment) and not KPI (Key Performance Indicator.) Most people very good at idealizing end-states where they achieve a windfall investment, but are are less interested in what is in it for the investors, or more importantly, what benchmarks one can establish to prove that what we are doing is working. I have seen many hypothesize that Leftist orgs will just throw money around to activist groups to normalize their ideas, however the money train will halt if a plan isn’t working, which indicates there exists a plan. While we may not empathize with the Open Society Foundation, we can still understand that they won’t waste their money on anything that can’t be tested and analyzed.

I was speaking to some noteworthy influencers in our political space who advocate for angel investors as the key to success, but more as a capital sink in the interest of doing “what is right.” The duty of charity directed towards ill-defined movements. This is precisely the wrong approach.

The latest political movement on the Right hasn’t so much been exiting the system as imagining a world in the negative space outside of the current system, and not so much embracing socialism as it is figuring out how to hijack the welfare state to serve these ends. During Covid, across every dimension of the Right there was talk of seizing the money while it was available, especially if the system will allocate it to discombobulating enemy forces anyway. Post-Covid, this is where political advocacy could come into play in the area of spigot-hijacking, if one understands the flooding of of capital is opened over initiatives the government believes are important – such as the rapid bank bailout of 2008 – and turned off over movements they would prefer marginalized.

Generational demographer Neil Howe makes the argument that Boomers aren’t really joiners.  They’re only focused on themselves and their individual success, using voting as the tool to compel that outcome. In this sense, those who desire the attention and patronage of this group should not advocate for political solutions in a broad ideological sense, but rather advocate for narrow financial solutions through politics. Victory for whatever your objective is comes with the answer to the question “what’s in it for me?” It is a boldly cynical and self-interested strategy, but this will make it understandable to Baby Boomers, right as the Competency Crisis hits its apex.

To some it may sound like racketeering, but to the rest it sounds like politics as usual.

There are immediate exploits for this. Under the current laws, Social Security will exhaust its trust funds by 2034, and then benefits will be cut by 23%, according to the 2022 Social Security Trustees report. The good news for bureaucrats is there’s a million ways to kick the can down the road without raising taxes or cutting benefits. Whether or not you are a subscriber to Modern Monetary Theory (MMT) the reality is the government will never permit social security to collapse for Baby Boomers. The cheques will never stop arriving for those already receiving them, yet there is the dull panic residing in the back of the mind of most young workers that they will never enjoy such rewards for a life of hard work. The topic is wielded for the purpose of scaring Boomers into voting for something, and this is where you come in.

One hypothetical policy is known as the 45k Plan, the logic of which going something like: the average child in public school costs $15k a year, so the state ought to pay those who homeschool their children $15k per child with a cap of $45k, effectively making the stay-at-home parent a salaried teacher. While this has immediate benefits for enterprising others looking to form homeschooling networks, this could be reframed as income for retirees, specifically grandmothers who often end up looking after their children.

A narrative must be constructed to how this benefits the Boomer voting bloc, while the lion’s share of the benefits will go to future generations. This could be the very push needed to open the spigots over families looking to break away from corrupting influences, using Boomer income uncertainty as a battering ram.

From where we are standing in 2024, we have just started going into what looks to be a steep contraction in public and private businesses. It’s a perfect storm of inflation and the corresponding decline in consumer spending, the easy stages of deglobalization and “friendshoring,” and rapidly rising interest rates which dry up access to cheap capital. 35% of publicly traded companies in the US alone don’t earn enough in top line revenue and mass layoffs have become normalized, especially in the tech sector which for decades has been a massive driver of employment growth.

This brings forth problems specifically for those in the political milieu that seems primed to address these problems. From an investor’s point of view, there has been no evidence that there is money in this political space that most of this readership occupy. Due to the lack of proof-of-life of most organizations people want to launch, any serious investor could not in good conscience deploy funds in the young and ambitious spaces that are attempting to create viable alternatives to mainstream structures.