The gap between the rich and poor is growing in the United States. This topic mostly concerns the wealth gap between the Baby Boomer and Millennial generations. However, this gap looks different when you compare the baby boomer generation to the millennial generation. The wealthiest baby boomers are richer than the average baby boomer. But the gap is even bigger for millennials - the richest millennials are way wealthier than the typical millennial. This essay will explore why the wealth gap is so much larger within the millennial generation compared to the baby boomers.

When you compare the millennials vs baby boomers discourse, you’ll find the discourse to center around issues with translating their income into home ownership, having to worry less about retirement due to access to pensions, not having student debt, and being able to buy investments at a time when valuations were lower.

The issue with valuations is a bigger deal than many think. When someone invests in an asset, the valuation metrics determine whether someone is getting a great deal on their purchase. As many will say, riches are made when people are buying assets for cheap, and that usually happens in recessionary times. For the Boomers, they got to buy assets for cheap during the 1970s and early 1980s when the US economy was in turmoil. For Gen Xers, they had the opportunity to buy assets for cheap during the 2008 financial crisis. Millennials were supposed to have the COVID crisis be their opportunity to buy assets for cheap, but the actions of both the federal government and the Federal Reserve made the dip buying opportunity small, and asset prices went from being less expensive to super expensive.

With millennials being stuck with a lack of opportunity to buy assets for cheap, it’s understandable why millennials have a harder time translating their incomes into homeownership and have more anxiety about retirement. Looking at the chart below by the Financial Times, we can understand why people are concerned with the wealth gap between the average boomer and the average millennial. But when you compare the top 10% of millennials and the top 10% of boomers and compare the gap between their average peers, we will find that the wealth gap is larger among the millennial generation.

Learn more about the wealth gap conundrum between the top 10% of millennials and the average millennial in this article: https://dissectingthemarkets.substack.com/p/the-millennial-wealth-conundrum-exploring

I give credit to the crypto maximalists and gold bugs for pointing out that fiat currencies are not perfect. But when accounting for the interest generated, they prove to be remarkably resilient stores of value. Gold, crypto, and other alternative assets have their place, but the narrative that they are vastly superior to the dollar as a long-term store of value is simply not supported by historical data.

I credit the zero-interest rate environment for sparking this discussion. Before the era of zero interest rates, people got a good rate of return on their savings accounts and because of this, they did not worry about their money getting eroded by inflation. Because of the zero-interest rate environment, households got essentially nothing on their savings and meanwhile, prices for goods kept going higher and higher.

When interest rates start to rebound higher and households start getting better returns on their savings accounts, I’m curious to see if more people will still think the dollar is a bad store of value.

Learn more on why the US Dollar is a better store of value than what the common opinion of it is in this article: https://dissectingthemarkets.substack.com/p/the-us-dollar-is-better-at-holding

Since the Russian invasion of Ukraine, the economic and financial community has been bearish on the European economy. They’ve been pointing out all the flaws it has, the disastrous policymaking, and how the US has been stealing all the factories from Europe. While there is truth in the issues that are pointed out, Europe has been able to grow despite everything. Europeans are living better lives today than they were back in 2006.

All media commentary on Europe stagnating economically compared to the US has all been based on GDP numbers indexed in USD. As you can see in the image below, when comparing the US and European GDP per capita, you’ll find that the US has continued to grow despite the 2008 financial crisis while the European economies haven’t recovered from the same crisis. That’s because the numbers are based on dollars, which have appreciated considerably when compared to the Euro.

Learn more about the European economic miracle here: https://dissectingthemarkets.substack.com/p/europe-is-an-economic-miracle

The Congressional Budget Office projects the US debt-to-GDP ratio to grow from 97% in 2023 to 116% by 2034. For perspective, the US debt-to-GDP ratio during World War 2 was 116%, the highest debt-to-GDP ratio that the US has experienced. While the chart below is from 2012, add the tax cuts, the new wars that occurred, and the pandemic and the chart will look worse.

Since forecasting the US debt-to-GDP ratio comes with many variables, Bloomberg Economics ran a million simulations to predict the likelihood that this ratio will increase. As Bloomberg noted, “[i]n 88% of the simulations, the results show the debt-to-GDP ratio is on an unsustainable path - defined as an increase over the next decade.” From that, I wondered why 12% of the simulations showed the debt-to-GDP ratio on a sustainable path.

You can learn about the 12% of simulations that show how the US debt-to-GDP ratio is on a sustainable path in my Substack article in the link below:

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