Will Early Retirements Crash the Economy?
I recently saw a poll that was sponsored by T. Rowe price it showed forty three percent of millennial workers expect to retire before the age of sixty five that compares to thirty five percent of those from generation. X. which is ages forty fifty five. This survey was referenced in an article by Gina Smith Alec of The New York Times. The article was titled. How millennials could make the FEDS job harder. The subtitle they love the idea of retiring early that could diminish the Federal Reserve's firepower the article reference. How millennials in order to leave the workforce early with need to build up massive retirement funds and buy less things and that lack of demand could hit consumption which would slow economic growth leading to ever lower interest rates. The author mentioned the paradox of Thrift. Which is if everyone tries to save in mass that could lead to lower economic growth lower inflation and trip up the economy. She writes when consumers save a big portion of their income. They are not spending as much on dinners out. Movie Nights and cars businesses respond by investing less than equipment and technology and productivity stalls. Bosses are unwilling to pay their workers more for the same output and week pay gains further restrain spending. Would a wave of early retirements cause such economic turmoil? That's what we're going to explore in this episode. The fear that early retirements would cause economic. Turmoil is not new. It was prevalent in the nineteen twenties. Which are sometimes called the roaring twenties because it was a period where economic growth was very very strong in the US was following World War. One Manufacturers really hit their stride. They were able to produce goods that were affordable to the masses the economy the measure of output gross domestic product grew by about forty two percent during the nineteen twenties that compares to about twenty five percent economic growth during the most recent decade real per capita GDP. The amount of output produced per person grew from sixty five hundred dollars. This is on a real basis so negative inflation to nine thousand seven dollars about a forty percent increase between twenty ten and twenty nineteen real per capita GDP in the US grew from just under fifty thousand to just over fifty eight thousand about a seventeen percent increase now is from a smaller base in the nineteen twenties but it was a period expansion even greater than the expansion of the most recent decade where we didn't have any economic recessions in the US in the nineteen twenties. There were several brief periods of economic contraction. But generally speaking the economy was doing very very well Lincoln steffens. He's an investigative journalist was known for his investigations on corruption. Business in one thousand nine hundred ninety eight he wrote big business in America is producing what the socialist held up as their goal food shelter and clothing for all president. Calvin coolidge said. This is essentially a business country. Journalist Samuel Strauss in the Atlantic monthly in one thousand nine hundred eighty four wrote. This is our proudest boast. The American citizen has more comforts and conveniences than kings had two hundred years ago. He pointed out the signs of that prosperity. Automobiles radios buildings bathrooms furs furniture. Ocean LINERS HOTELS BRIDGES VACUUM CLEANERS. Cameras Bus Lines Electric Toasters moving pictures. Railway cars packaged foods telephones. Pianos novels comics. These things were made available. Because of mass production efficiencies in the manufacturing process they were also accessible to the public not only because the prices were affordable but credit was available installment purchases