U.S. bank lending slumps by most on record in final weeks of March (opens in new tab)

Monetary policy has incredible sway over the economy, so they should bear the brunt of the blame. It's odd to me that everyone talks about how important democracy and elections are, but when it comes to the mighty dollar, the thing that runs this country and largely the world, all decisions affecting its value are made by a board of unelected individuals behind closed doors through opaque models. The FOMC membership itself partly consists of bankers elected by other bankers, which always seemed like a conflict of interest to me. The Fed deserves more scrutiny, if anything.

They introduce top down decisions on what is a bottom up complex emergent system. Beyond being an exercise in futility to control it that way, it introduces irrationality to the whole thing as it becomes a politically driven thing. That irrationality makes everything else behave that way and we loose any sense of "natural" trends and predictability. The bailouts are a perfect example, we are now surrounded by zombie companies and uninteted consequences which are making the whole thing more fragile and unstable.

Separate to the "(non)-deterministic" question which would detract from this discussion.

One part we also fail to consider is that there is a feedback loop between all the individuals in society and any large economic levers that get pulled. This along with all the complicated interactions that are a result of the specific imperfect set of information each individual has makes this problem next to impossible to fully model. At best we could have approximations and models that abstract that complexity away. We approach something similar to the N-body problem in physics, which on some level I'd argue is simpler even as we have specific equations government their behavior. Not so the case for humans and their "internal" decision making process.

> Withdrawing from a 401(k) has no real effect.

Highly disagree here....

First, selling stocks puts downward pressure on price and also p/e ratio. A lower p/e ratio means startups and growth companies trade at lower multiples.

Second, selling bonds increase yields, which means the price of borrowing (interest rates) goes up. When that happens, companies that borrow money (most of them) see lower profits because more money is spent on interest than on investment (machinery, people, etc).

Capital markets are complicated beasts, but withdrawing capital has very predictable effects - we just don't know if the effect will happen slowly or quickly (like in a panic).

One other effect that happens is that as people retire (or get close to retirement), their investment choices become more conservative and there tends to be a shift from smaller, more volatile growth companies to larger, more established companies with good dividends. That shift alone is worth a thesis or two.

As for your last comment, I can't tell from the wording whether you agree or disagree with the PP's comment. However, I would note that since the baby boomer generation is larger than the Gen Z now entering the workforce, that on average, experienced people are retiring at a higher rate than the rate that young inexperienced people are joining the workforce. This tends to result in higher labor cost (fewer people to fill jobs), which, when combined with higher interest rates tends to mean lower growth for a good period of time (measured in years, not months). Obviously there is variability from month to month and quarter to quarter, but the trend is clear (or will be soon to everyone). It's not the 1970's, but some of the parallels will be surprising.

Wouldn’t withdrawing from your 401k and transferring it to a checking account limit the pool of funds available for equity investment and move it into lower risk assets?

That's an interesting thought.

I prefer to use the word "de-globalization", which covers some of the same effects.

The problem is that when you put a dollar in savings or a dollar in the stock market you are actually "creating" an extra dollar from an economic standpoint.

If I put a dollar in the bank the bank can then use that dollar to loan to someone else, but I still have "my" dollar. So where there was 1 dollar there are now 2. Once we start pulling money out of investment vehicles we aren't only removing that money but also the backing the loans that depended on that money had.

Thus the boomers pulling out for retirement result are the capital destruction event.

> It will be inherited by Gen-X and Millennials who will do something with that money.

The boomer ethos is “have the check for the funeral bounce” so that spending will be shifted forward.

Key word living though, right? This is because folk have, well, died?

I don't fully understand how the millenial population can go up between 2019 and 2033 on that chart.

American baby boomers are worth, on average, something like $1.2M depending on your source. That's a lot of retirement capital that will be leaving various markets and chasing goods and services over the next few decades.

Retiree wealth mining is the next great gold rush!

One interesting scheme I recently came across is an assisted living home that doesn't take regular payments. Instead, they have their residents sign over their entire net worth at the event of their death, leaving nothing for their inheritors. The tradeoff is that they get to stay for as long as they live. Of course, this scheme has some obvious perverse incentives for the operators of the home.

This massive labor shift toward service work has been well underway across the US. See, eg, this excellent case study of how Pittsburgh's aging, shrinking cohort of unionized steel workers (with good health insurance) has been demographically offset by a growing (precarious, non-unionized) medical and care industry. Now the largest employer in Pittsburgh is the university medical center, and the largest sector is care workers.

https://shop.nplusonemag.com/products/the-next-shift-by-gabr...

This pattern isn't unique to Pittsburgh, of course, and has played out broadly across the US.

Lets just hope it's done by the government and not by private corps gouging people who just need care.