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The Millennial Generation Has Negative Savings

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  • Tue, Nov 18, 2014 - 03:40am


    Adam Taggart

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    The Millennial Generation Has Negative Savings

As I went into in detail in my earlier article, Americans Can't Afford The Future, the millennial age group (adults under 35) is in serious risk of becoming a 'lost generation'. 

Due to a sluggish economy in which fewer job openings are available to them due to older workers who won't (read: can't) retire — as well as outsourcing, downsizing, and automation — millennials aren't developing the expertise, or even the opportunity, necessary to capital formation.

So, it's little surprise to learn that the millennial generation has a negative savings rate:

Millennials aren't saving a dime (CNN Money)

Cash-strapped millennials are slipping into the red.

People younger than 35 are not saving money, according to a study by Moody's Analytics. In fact, their savings rate has dipped to negative 2%, meaning that they're spending more than they have. They're the only age group that has a negative savings rate.

In contrast, workers between the ages of 35 and 44 have a positive savings rate of about 3%.

Millennials are struggling in spite of an improving job market, with an unemployment rate that dipped to 5.8% in October as the U.S. economy added 214,000 jobs.

But wages have remained stagnant, barely budging since the 1990s. So even with a low unemployment rate, millennials are having a tough time making ends meet. Many have taken on hefty student debt to attain the skills they need to be competitive in the work force.

Things were a lot worse just a few years ago. Millennials had a negative savings rate from 2004 to 2009, bottoming out in 2007 with a deficit of about 15%, according to Moody's.

They recovered in 2009 and managed to stay above water until 2012, when they slipped back into the red.

Related: First-time homebuyers abandoning the housing market

Many college-educated millennials are able to find professional jobs, but they have limited upward mobility according to Babson College finance professor Dr. John Edmunds.

"The millennials are waiting for those above them to either retire or die," he said. "But the baby boomers are not going to give it up that easily."

We are handicapping our future by squandering its development opportunities, while simultaneously burying it under crushing loans and excessively high costs of living. When the time comes — as indeed it will — to pass on the torch of productivity, it should come as no surprise when there's no hand present or capable of receiving it. And the fault will be ours, not theirs.

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  • Tue, Nov 18, 2014 - 05:42pm



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    I don’t know if this stat is

I don't know if this stat is accurate or not, but I read somewhere that ~90% of the oil ever used has been used since the time JFK was assassinated. Baby boomers thus were born into a time when a wide variety of historically useless skills became marketable in an increasingly complex society.  As we enter the next stage of human history the millennial will be handed the reigns of a society that no longer operates the way we were taught it's supposed to.  Skills that we have trained for (computer programing, econ, internet advertising, aviation, construction, chemistry etc) will still be needed, but the opportunities and the rewards will both have entered the territory of diminishing returns.  Maybe they already have and that's why the boomers are still working past retirement age, trying to scoop the last few spoonfuls of soup out of a bowl with a hole in the bottom.  The transference of opportunity in such a complex society doesn't flow from parent to child, but from retiring parent, to open job market, to whoever is most qualified and least expensive.  The sacrifice needed to make room for millennials in a shrinking market doesn't guarantee a job for ones kids, but if you keep working maybe you can help them make the bills.  A market is designed to remove human ethical barriers to economic expansion by making all transactions and career decisions as impersonal as possible, so we can't even blame it on the boomers, they're stuck in the same system.

The best strategy I see for my generation is to do everything we can to avoid the debt trap. Capitalize on the liberalization of information that is available with the internet and educate ourselves.  Learn about what is happening in the world, but more importantly, learn some useful skills.  The best are those that are marketable now as an entrepreneur and add resiliency in an uncertain future.  Anything related to production of staples (food, soap, clothing, shelter, clean water, off grid energy, basic tools etc) is a good bet.  We have to be prepared for a less prosperous future than our parents lived and still be happy people.

  • Wed, Nov 19, 2014 - 12:16pm


    Chris Martenson

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    Great explanation


The transference of opportunity in such a complex society doesn't flow from parent to child, but from retiring parent, to open job market, to whoever is most qualified and least expensive.  [/quote]

I thumb-ed up the whole comment, but I want to draw out the one part I've quoted because I think it's a neat and tidy explanation for how declining net energy plays out at the job level.

As we slip down the energy cliff, we cannot know exactly what each culture will decide to jettison as 'unnecessary' activities.  Some decided to cut down trees and erect giant stones right to the end.  A different culture would have chosen some other activity.

The question to ask is, what are our equivalents of giant stones?  What will *not* disappear as the green area shrinks?

My best guess is that we'll cling to technology as the last things to erect before w succumb to reality.  Maybe that's just talking my own book, as they say on Wall Street, because that would imply the internet will be salvaged/preserved at any and every cost.


  • Wed, Nov 19, 2014 - 12:52pm

    robie robinson

    robie robinson

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    as i understand it

instead of buying another tractor, i should buy a broke team of horses and be sure one of them, at least, is a mare.


  • Wed, Nov 19, 2014 - 01:43pm



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    cmartenson wrote:The


The question to ask is, what are our equivalents of giant stones?  What will *not* disappear as the green area shrinks?


Very interesting conversation, and a salient reminder of the Easter Islanders.

I would guess that in an age of declining net energy, some of the things that will consume as much or more of world GDP (as a percentage) include the centralized hard-path and top-down priorities such as warfare, the security and prison industries and industrial agriculture

And on the more decentralized, bottom-up, soft path we will probably see an increase in micro energy projects of many types (e.g. home solar hot water heating, small PV systems), more market gardens and an increase in subsistence agriculture, and also possibly more spending from the bottom up on security as well.

I wonder what things will disappear first…I guess it will be the things with the greatest price elasticity of demand…the things people are most wiling to do without.

I know for me, as soon as I realized how unsustainable things probably were, I reduced the amount of times I would go to a restaurant.  I think that restaurants are pretty vulnerable to recessions in general.

So, for starters, I would guess that the restaurant industry will suffer a lot when net energy really starts to fall, unless they can produce food for less total energy than households can.  Maybe big cafeterias with low quality food and/or street vendors with simple dishes served from trailers, using very little energy/time/labor per calorie will become more common, but what we in America would call medium-quality or fancy restaurants will be more likely to go out of business.

  • Wed, Nov 19, 2014 - 04:01pm



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    Sprawl and happy motoring

What are our large stones?

I think that Americans are clinging to private transportation and the whole culture of cars, trucks and suburbia. (Have you read The Long Emergency by Kunstler?)

In the "purple" state of Wisconsin, Scott Walker originally got elected on the platform that he would return money earmarked for high-speed rail back to the federal government. 

The same people that insist that we don't need trains or buses are also the same ones who will be bitterly complaining when the price of gasoline goes back up again.

In fact, they are probably the same ones who recently purchased SUVs. They are not a fringe group. but rather the ideal consumers that advertisers and the mass media loves.    

  • Wed, Nov 19, 2014 - 04:28pm



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    What’s left

How long does this realization/adjustment period typically take?  Do we have data from previous societies? I suspect given the specialization and military positioning, it could take an entire generation or more.  Maybe several generations?  

I would probably advise Robie against buying those horses..

  • Wed, Nov 19, 2014 - 05:17pm



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    Our “Stones”

For some reason, this came to mind:

Perhaps hundreds of years from now, when the remnants of our continent's civilization are wandering the great plains, gathering "nuts and berries", they will stumble upon this great monument and use it for whatever rituals are in vogue at the time.

(the site took long to load, at least it did for me)

  • Wed, Nov 19, 2014 - 07:58pm


    Bankers Slave

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    I would imagine that

the Vatican with its vast documentation vaults of over 1000 years of history would have the data that would give us an insight to what we can expect in the future, when reflecting upon previous societies!

You never hear them coming out against lying war mongering psychopaths, so don't hold your breath for any Vatican honesty for humanity any time soon! 

I am sure there will be an ark, coming along sometime soon!surprise


  • Wed, Nov 19, 2014 - 08:02pm



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    Motorcycles are the new station wagons


I think that Americans are clinging to private transportation and the whole culture of cars, trucks and suburbia. (Have you read The Long Emergency by Kunstler?)


Yes, I agree that we'll hang on to our cars for longer than is prudent, but economic pressure will probably still force some change in terms of transportation.

As has been noted here before, another change we are likely to see in the developed world is a big increase in motorcycles and scooters. Motorcycles are already huge in the developing world.  

In the Philippines, a motorcycle can often be the family car, at least for those families that can afford one. While Ralph Nader may not be very impressed with the safety statistics, they're certainly fuel efficient.

There are also what the Filipinos call tricycles, which are mostly used as taxi cabs, although you can also pay someone 10 pesos* (less than 25 cents) to take you up to a kilometer in a 100% human powered pedicab.

Barring a Seneca cliff scenario, I would be happy to make a wager that there will be more motorcycle miles driven per capita in the US in 10-20 years than there are now, even if gas gets a lot more expensive.  

One growth business might be motorcycle dealers & repair shops.

*Here's a picture of pedicabs in the Philippines.  The 25 cents per kilometer price is the price in a small provincial capital.  It would be higher in bigger cities such as Cebu and certainly higher in Manila.

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