Author Archives: Justin Lee

Blog Post 39: The Dominance of Simplicity.

-thesis: Comcast and AT&T should do whatever they can to stop Google from expanding its networking system.

Even though the access of media is the most important aspect of our society, the cost may be a barrier that causes people to have a doubt about. Those who have subscriptions through Comcast or AT&T (and couple others) should have a strong feeling about the fallouts that customers have to pay because of the monopoly. For more than $150, you are to be subscribed with couple hundred channels while you watch 10 or 15, and I do not have to mention your satisfaction of the speed of the internet connection (and yes, the last part is meant to be sarcastic). To top it all off, they increase the price every year. No matter how much you try to haggle your price, the price only increases in the end.

It seems like Google understood our frustration. For those who have paid attention to the ways you can save your money on cable subscriptions, you might have heard something called Google Fiber. Basically, it has 200 set channels and a couple of internet speed selections with a fixed cost (here is an example: services for Austin, TX). While Comcast and AT&T use price discrimination, Google Fiber tried to be as simple as possible. In addition, there are no (at least, not yet) reported “cheesy” charges such as “broadband service network fee” or “customer service additional charges,” those that we will never understand.

 

To argue with the side of Comcast and AT&T, those price discriminations (and bogus charges) have been a “necessity” to invest in better technology. The technological investments include merging with Time Warner Cable, negative ads against satellite providers, and ever so not-helpful customer call center. Of course, there are positive development such as Comcast’s new X1 platform and 2 gigabyte expansion in bay area to subdue the increasing dominance of Google.

To be honest, if you are not a software developer or financial traders dealing with big data analysis, you will not recognize the changes that Comcast (or AT&T) is making. Because your subscription is limited to the level in which you have to wait couple minutes for your Netflix movie to play smoothly, those investments that you made to the companies (i.e. monthly charges) is not worth anyone’s.

And the market realizes this. Those cities such as Nashville who was just selected for the next cities for Google Fiber project have worked hard to attract Google to install the service. Even city government officials have worked to promote the idea.

It shows that the supply side of media providers is still driven by the market, not by the supply side. And if Comcast (which has affiliate with NBCUniversial and will have minimal damage) and AT&T (which will take the most damage) want to survive the emerging competition, they have to get rid of the old system they are in right now.

While once-hot famous Italian places may still attract customers, a new gourmet restaurant is actually the one that is running the table.

Blog Post 38: Turn

-thesis: With positive inflation of U.S. seems prominent, the drop of oil price was significant indication of potential economic growth.

Measuring the health of the economy with inflation has its own merits and issues. One of the issues is that inflation is heavily depended on prices of certain objects. One of the examples is crude oil. As we know, the economy (or in focus, consumption pricing) is heavily depended on mechanical industry, which heavily depends on pricing of the oil. In past few months, we have faced the plunging prices of the crude oil. While price is set months in advance, we may be seeing the economic outcome of the plunging. And, the outcome looks to be a constantly increasing inflation. Considering the oil price is one of the biggest indicator (next to demand-side consumer purchase), I will argue that the oil price was the biggest factor in this (possibly a long term) economic growth, by using the process of elimination.

The recent report suggests that the change in CPI hit the positive note, something that we did not have since February of 2014.

Before I argue on supply-side economy (oil), we should make some fair note about the demand side. The hottest topics of the demand side (mainly purchase) are housing, unemployment, and consumer expectation.

As I mentioned previously, housing market is not something that is getting better. The non-corporate property ownership is declining, while corporate ones are skyrocketing. Of course, the article cited reports that the housing sales noted 7-year high. But, we have to look at who is actually purchasing, and in the argument, I take the side of WSJ report.

The unemployment rate argument can be made using data available. And, of course, I will argue that we have to be careful with what Fed and politicians say, as they tend to be biased. On a simple note, NO. The labor market is not getting better.

Also, we know that consumer expectation, something that I argued as a good indicator of future aggregate economy, is not reported to be increasing well. In recent report measuring the index for March, the expectation has rebounded, but not in the scale that would steadily increase the inflation like we are observing this year. Since the expectation is a good measure of demand side of the economy, we can argue that the demand side does not drive this increase in inflation. While demand side economy determines over 70% of the aggregate ones, we can now argue that the inflation is driven by the next big one.

As a result, one can now argue that the price of the oil is a significant contributor of the inflation. I have to stay away from causal interpretation, however, since every scrap of indicators in aggregate economy indicates their positive values. But, based on what we observe as a scale, it is the biggest factor.

Blog Post 37: Lagging Technological Development.

-thesis: No matter how innovative new technology is, the society should not be in the position to play catch-up game, even if we have to delay the process of progression.

 

On the premise, technology comes from the need. The need can be defined as the absolute need of survival (construction of buildings or medical technologies that cure once incurable), or the need is based on the development for more comfortable future. The point is that it comes from the need. In the economic sense, I argue that the technology should be demand-driven. The basis will be based on legal and public acceptance ground.

 

The legal ground is something that we are all familiar with. At some point, technology became an overwhelming source against the law. On a historic note, early 1900’s development is shadowed by two wars, drifting how people access the residue of technological development of the war. At that point, it was not the case for concern in legal ground. Because government had its own experience with the technology through war, it knew how to release knowledge to public for use.

 

However, starting with the creation of Alan Turing, the public sector took a grip of the development. And, right now, we are observing the evidence of the growing pains for developmental outbreak of technology. From Google’s antitrust lawsuit to patent war between Samsung and Apple, it seems like the integrity that the society claims to uphold seem to be lost.

 

Can we confidently say that the institution (government) has managed to set up a decent trust system to make sure that companies would not have issues with legal ground? Are there any issues with forming gentlemen’s agreement to honor the science between economic agents? To be honest, you cannot expect trust from people who only can play with knowledge. Thus, only way to sustain any social decency from people is a set up a legal ground.

 

However, we know that there are limitations. First is lobbying, which I am not going to be in-depth. Second is the duration that it takes for legislations to become a law. Passing congress and Supreme Court is something that is very hard to do even within a year. Assuming it is unrealistic to pass in either institution, then only way for the society to expect social decency is to not have (or delay) the new technology.

 

Now, for those who may have hard time accepting the government side of argument, here is my second one. In my previous blog post about job creation with technological development, I briefly mentioned about people accepting/adapting new technology/knowledge. There are certain limits for people to understand and have willingness to adapt new technology. For example, there are arguments about smartwatches. If the aggregate market is any strong indication, people are having trouble accepting digitalized (what is preferred to be analogue) watches. While certain companies are thriving at sales, many questions are raised rather the smartwatches are created based on the needs or not.

 

Not able to see the need can be a one thing. But, how about the progression in medicine? We see the need of it (assuming it is for positive ones). But there are a lot of oppositions against certain medical research. The biggest battle ground is in stem cell research. A lot of opposition argues that it is a road to create (scientifically modified) human being. First, no. Unless you are intellectually challenged, you can learn that human gene is much more complicated than sheep, dogs, and mammoths. Second, there are some diseases that cannot be cured by methods of invasions (medication and surgical procedures), and stem cells plants for replacement (as of now) is one of the few progress that is being made in medicine. The problem is that, because of the incorrect understanding based on short reading capability like someone, the technology is facing a lot of oppositions, regardless of president’s public support.

 

If these are the cases, then we have to seriously think about how we adapt new technology. And I truly believe that delay of adaptation will better the society.

Blog Post 36: Rewr.: The Job “Creation” Should Mean Creating, Not Returning.

-thesis: The routine workers, a lot of times, lack in human capital. Developing the productivity and extending human capital is important (which does not include college). And, because of this, the argument of job creation (a lot of times, by politicians and economists) should consist of actual creation not return.

 

There are good papers by developmental economists suggesting that technological development does not cause unemployment (in a LONG RUN), notably Easterly’s argument on Solow’s model. Of course, it does not account for the real life fact that (based on its assumption) people cannot make transition with the speed of technological development.

The routine manufacturing is the perfect example of the source of concerns. The routine manufacturing does not require significant training (human capital) most of the times. The firms with routine manufacturing employs (or un-employ) workers who lack in human capital. It is a group in which nevertheless do not have capability of making the transition like Easterly suggests. To make it worse, there is competition inside and outside of country with the kind of (relatively) simple labor.

The recent study suggests that the number of occupations with routine operation has declined since 88’. The WSJ reports that only non-routine works involving human capital (extensive knowledge of the respective fields) has increased.

So, I argue that all the talks about the aggregate labor economic benefits of GM bailout and Keystone pipeline were/are overstating (and contradicting) the current phenomenon. Of course, recession did hit the argument hard, suggesting the economic setback resulted unemployment. But the setback is not the only thing to be blamed for. In fact, by nature, we all should realize that the routine jobs would disappear soon enough.

Of course, there will be a threshold, just like agriculture, of minimum routine workers (under the assumption that technology cannot fully replace human workforce). However, this analysis should alarm policy makers that bettering unemployment by returning routine-working jobs should not be the main agenda. The new agenda should focus on strengthening human capital (especially for those with routine work experiences).

It is to be argued, at this point, that college should come as a front-runner of the human capital. However, I argue that accessibility of college should not be part of this argument. First (which many liberals will argue against this proposition), there are enough college graduates out there in the market that creates unemployment category just for college graduates. And there are plenty of examples why we should not focus on college.

On a side note, the overgeneralization of quality of college graduate at this point makes me sick. Don’t people ever thought about the possibility of average guy from street who has 20 years of real life experience based on technical training can be more productive than 40 years old Ph.D? It is not to argue that college degree should be privileged. The college degrees should be monitored carefully; and individual’s (not collective, which suggests that “degree from college” tends to be a free pass for a lot of jobs regardless of individual quality) human capital should be measured. To make things worse, in college, there are trends in which social capital tends to be valued more than human capitals.

With the critiques that I have for college degree, I want to further my argument in terms of what direction should policy makers should focus on in terms of human capitals other than college education. The main focus should be on the productivity of the workers and extending the range of human capital based on targeted sectors (or career direction, in more generic term). The issue with colleges, which many people tend to overlook (to argue for accessibility), is that it is not specialized. Not every worker can afford to spend four years in desks. However, there are vocational and technical trainings beyond colleges that are tailored toward those in need for extending the human capital in reduced cost. Unfortunately, those are overshadowed by the recent trend of glorification of college degree. And it is the exact point that should be raised and encouraged: the technical understanding of specialized increase in human capital should be encouraged to make sure that those in need of the transition from routine workforce to more technical workforce.

Blog Post 35: The Chinese Bubble: Example from Alababa and Xiaomi.

-thesis: Regardless of common belief (which is reflected on its market value), Alababa and Xiaomi’s true values are inflated.

I had a chance to talk to a representative of Nielsen. When he started talking about Alibaba, this is what he said,

“it is like Amazon.com with steroid.”

Of course, more grammatically correct term, it should go “steroid-injected.” But the intention of this quote (for him) is to express its strong power, compare to American e-commerce such as Amazon.com. Its power is well shown in financial market. Of course, the market is reflection of what people believe, and it does not necessarily represent the true value. This argument set aside the stock values of respective companies from China, as this post will reflect what respective companies offers/owns in the aggregate economy from sales point of view. In case of Alibaba (e-commerce) and Xiaomi (cell phone producer), the value is inflated.

We first have to remember where they are from. If you have a firm in a market with number of intended customer as a quarter of world population (significantly smaller for actual target customer, but still large) with no significant competitor, you are expected to make a good profit. In case of China, Alibaba and Xiaomi, in terms of size of potential customers, cannot be compared against Amazon.com and Apple in North America. With cheap production line (if there are any) with less tax compare to other markets (North America or Europe), Alibaba and Xiaomi were bounded to be successful.

In terms of how they grew, I would point out the negative side of things (which positives are obvious for some). Do not understand this in a wrong way: Xiaomi, for example, has been ignoring the integrity of innovation. No matter how hard they try, people with rational will realize the products that Xiaomi produces look a lot similar to previous products that Samsung and Apple created. And rational people will also realize that one cannot create smartphone with three patents (the article says two, but it is actually three). If their financial side of the company is that big (which is not, when you compare sales and profit), you have to wonder why they are not putting themselves all in North America and Europe. Their products cannot be protected outside of Chinese influence. While the reviews of its products observed to be positive, it needs a precise note that the company ignores the assumed integrity called respecting creation for innovation. No matter how hard they try, if they do not fix the core identity that they had since the birth, they are going to be buried.  Oh, and yes, it looks like Alibaba is facing lawsuit.

In terms of where they are now, we all know where they are now. Most of their sales systems are stuck in China and neighboring Asian countries, with all the reasoning implied above. It is ok to glorify your sales with Guinness, but it is recommended to cover the details and critically evaluate the background before you jump in to conclusion. The representative of Nielsen was right about steroid part; of course, the implication should also be explained with the illegal part of the steroid injection (of course, with the exception of non-medical use). Ending on an exaggerated note: Louis Vuitton prefers the quality over the Guinness record because the record does not mean anything to its industry.

Blog Post 34: The Job “Creation” Should Mean Creating, Not Returning.

-thesis: With routine workers lacks in human capital (an being threatened their job security), developing the productivity and extending human capital is important (Not of college).

There are good papers by developmental economists suggesting that technological development does not cause unemployment (in a LONG RUN), notably Easterly’s argument on Solow’s model. Of course, it does not account for the fact that (based on its assumption) people cannot make transition with the speed of technological development. The routine manufacturing is the perfect example of the source of concerns. The human capital of routine manufacturing does not require significant training, most of the time. Thus, the industry using the routine manufacturing employs (or un-employs) those with lack of human capital, the group in which nevertheless do not have capability of making the transition like Easterly suggests. To make it worse, there is competition inside and outside of country with simple labor.

The recent study suggests that the number of occupations with routine operation has declined since 88’. The WSJ reports that only non-routine works involving human capital (extensive knowledge of the respective fields) has increased.

All the talks about GM bailout and Keystone pipeline is overestimated. Of course, recession did hit the argument hard, suggesting the economic setback resulted in unemployment. But the setback is not the only thing to be blamed for. In fact, by nature, we all should realize that the routine jobs would disappear soon enough. Of course, there will be a threshold, just like agriculture, of minimum routine workers (under the assumption that technology cannot fully replace human workforce). However, this analysis should alarm policy makers that bettering unemployment should not be the main agenda. The new agenda should focus on developing human capital.

It is to be argued, at this point, that college should come as a front-runner of the human capital. However, I would argue that accessibility of college should not be part of this argument. First, which many liberals will argue against this proposition, there are enough college graduates out there in the market that creates unemployment category just for college graduates. And there are plenty of examples why we should not focus on college. The overgeneralization of quality of college graduate at this point makes me sick. Don’t people ever thought about the possibility of average guy from street who has 20 years of real life experience based on technical training can be more productive than 40 years old Ph.D? It is not to argue that college degree should be privileged. The college degrees should be monitored carefully and individually to access the quality of individual’s human capital, which in U.S. is not happening (social capital tends to be valued more than human capitals in lower degrees).

The main focus should be on the productivity of the workers and extending the range of human capital based on targeted sectors. The issue with colleges, which many people tend to overlook (to argue for accessibility), is that it is not specialized. Not every workforce can afford to spend four years in desks (or even worth to do so). However, there are vocational and technical trainings beyond colleges that are tailored toward those in need for extending the human capital in reduced cost. Unfortunately, those are overshadowed by the recent trend of glorification of college degree. And it is the exact point that should be raised and encouraged: The technical understanding of specialized human capital should be encouraged to make sure that those in need of the transition from routine workforce to more technical workforce.

No matter what job figure out there suggests about the increase in employment, we know that the transition to focus on transitional human capital is necessary to keep workers out of unemployment.

Blog Post 33: The American Ball Game Truly Need A New Team.

-thesis: With diminishing utility, some of MLB teams will have opportunity to turn team around permanently with current demand from the city of Montréal.

As a sports fan, this past Sunday was one of the best days in recent memories. Besides the point of Major League Baseball started, St. Louis Cardinals managed to crush the arrogant egoistic storm based on Joe Maddon’s arrival. Although I might have shown my allegiance too strong, however, my today’s argument starts with the example of the Cardinals.

If you are a sports fan and have paid attention to MLB’s recent findings, the Cardinals should have stood out to you for couple reasons. The team, which contends for the World Series every year, tends to be in a middle of the pack when it comes to the club spending, notably on players. Its attraction to fans are all time high.

It means that there is diminishing return to scale in terms of spending by clubs. It means that clubs do not have to be the richest one to stay at the top of the competition. All the clubs needs are good triple-A teams for farm sustainability, good managers, and good fan base demand. Of course, if you are a bad team right now, the time of turn around varies depend on how desperate are the clubs. It is the clubs’ job to find the optimality. However, one thing to be noted: you don’t have to be the richest club in (North) America.

Which brings up the questions of turn around. The recent report suggests that there are demands for a club in Montréal (there was MLB team, but lost status in 2004). With new commissioner’s support, there may be a new team in MLB. However, there are 30 teams: 2 leagues, 6 divisions. It is a perfect structure that cannot be destructed by addition of a team. What it means is that a team may move its geological location to Montréal, if there is enough demand. And, the move will be better for teams that are looking for a turnaround, to become an annual contender of the World Series.

Despite the game’s tradition, it is given that franchises (or clubs) are for-profit. And recent attraction of being a third most popular sports (next to NFL and college football) in America, this can be an opportunities for some teams. Of course, there will be rejections from cities in area that would lose their baseball team. However, keeping an empty stadium is far from being a for-profit club. The two teams that are receiving attention are at Atlanta and at Tampa Bay. For its geological isolation and its successful past, Atlanta Braves has too much of its value around the part of the countries. That leaves Tampa Bay, which has to compete the demand against Miami Marlins. As for the utility, Tampa Bay Rays is the easiest choice to move the team for a new start.

Quite frankly, All Star games lost its charm. The league need another attraction to draw fans to keep the momentum, and a brand new club will not hurt, especially if we revive one from 2004.

Blog Post 32: Rewrite: Unemployment Rate is merely an Economic Idea.

-thesis: The traditional measure of unemployment rate should be reevaluated. With the flaws and weakness in every way possible, we need universal measurement of unemployment rate.

When bipartisan politicians are not barking at each other about the economy, then it maybe the fact that our unemployment rate maybe in the level of their like. In early march, some Fed officials thought that we would have a full employment rate after all. However, that report was negated by the fact that Fed lowered the estimated longer-run unemployment rate (full employment rate, natural rate of unemployment rate, ect…) between 5% to 5.2%, from where Fed estimated it to be in between 5.2% and 5.5% back in December.

At this point, the unemployment rate reported by Fed is hovering around 5.5%. It is approaching in a level that everyone can be happy. However, I want to question rather this is an ideal case that we can all be relaxed. And, Yes. It is about weakness of calculating unemployment rate. And, Yes, the example is about discouraged workers.

My argument starts with this article, arguing the better gauge of (labor) economic status. I am sure that many economists before me have outspoken about the incapability of current measurement of unemployment. I want to give example out of FRED.

Because of an unknown technical error, I could not solve the issues that I had with FRED (which I excluded graph at this point).. But, one can go to website and pull up the unemployment rate (both aggregate and one including discouraged workers). As one can observe, one thing can be clearly noted: most of you (not me) have underestimated the current unemployment rate. And Morath (WSJ writer for this article) and I argue that the healthier choice of unemployment rate is the “special” one (although, I do not see the special part of it). Notice the significant percentage change of the number of discouraged workers right after the end of recession. As I mentioned in previous blog posts, that number is not going down.

It is odd to me that Fed is actually struggling to decide natural rate of unemployment of one decimal point, while the proportion of discouraged workers are above 1%. This is merely one point that is raised when it comes to validity of unemployment rate. Another argument can be made against the inclusion of discouraged workers in the unemployment rate. One can raise a question about the opportunity cost of their productivity. We simply cannot judge how productive those discouraged workers could have. However, I argue that one’s productivity should not be valued on counting “employed,” as I seriously doubt that every employed ones deserve to be in their positions.

To make things worse, I want to raise an issue of measurement error of calculating additional values (discouraged workers, seasonal workers, ect…). In my previous blog post, the percentage point difference of discouraged workers (from previous) increased, which means that actual number (or proportion) of discouraged workers must have increased. However, as FRED result above shows, the number (or proportion, in this case) of discouraged workers actually decreased. The accuracy of methodologies by Ian Shepeherdson (my previous blog post source: WSJ) and/or by FRED should be measured carefully. As these two should have come from survey (which I NEVER trust, at all), this kind of contradiction raises a lot of question about the measurement itself.

These confusion leads to a great deal of manipulation when it comes to mediating knowledge to the public, which is called politics these days. One can argue that the unemployment rate is in the satisfactory rate. You can go to the other side and shout out any ridiculous number as unemployment rate, double or triple. The bottom line is that we have past the point of analyzing the unemployment rate as a mean of measurement (which one of reason why economists exists). We need a universal measurement (preferably conservative measurement, which counting all possible values including discouraged workers) to at least get rid of the confusion.

Blog Post 31: There Is No Good Samaritan Corporation.

-thesis: Keeping the cost down (in any mean) by Walmart should have been predicted when it decided to increase wage (which is not enough).

It might have come across as a surprise for many people. The Walmart, company that is known to cut as much cost as possible, decided to lead the charge of increasing the minimum wage. What could have been a center stage for the city of Seattle, Walmart was observed to change its identity of salty company. Well, we should hold the thought right now.

The increase in minimum wage, despite its political implication, by nation’s most profitable company threw off every utility model that traditional economists used a lot of times. Keeping the labor cost down, given the static quality of labor capital, is every development models have to maximize firms’ utility. And, Walmart was about to become the best example to break the sense. It did not disappointed economists, unlike many ideologists experienced. Resent analysis reports that the increase in minimum wage within Walmart do not merely reflects what company should provide, given the productivity. In this case, question can be raised as to how much productivity that Walmart workers bring. Of course, some try to ask this question, and it ended up forcing blue shirt workers to go strike. From these analysts view, marginal productivity is not well suited by marginal compensation (cost by Walmart).

However, as Walmart is dedicated to stay in first place when it comes to profit margin, it decided to raddle producers (of all kind) to lower the cost. This is not surprise like increase in wage. It was costumed for a long time. Have you wondered why Xbox was cheaper in Walmart? There you go. However, this time, it came out harder, to compete price in the market, to aim for market dominance. Along with (previously heated) minimum wage issue, the effort by Walmart to keep the cost down became a part of the identity of the company.

In economic term, Walmart’s policy is designed based on a simple supply and demand. Of course, you have to throw in the profit margin. What it looks like, company does not care a deep understanding of the productivity of workers and qualitative value of the firms. The increase in minimum wage might have pulled people to put good sign on the firm, but people should not overlook the fact what is happening beyond it.

There will not be a case of Good Samaritan of corporation. And, it is certainly not unethical thing like extreme liberals normally portraits. However, recent trends matters. The cost and quality of product is not the only thing that decides consumer behavior. Just like there is a strong preference over “made in United States” before the cost, Walmart should be ready to adjust away from their current strategy of being a “cost oriented” firms.

Blog Post 30: Not a Great Economic Combination.

-thesis: The troubling reports about spending might have caused by the phenomenon that baby boomers are not saving enough (nor have enough savings in their pocket) and millennials save too much.

In my previous posts, I have related consumer expectation as part of a source of lack of consumption, which drives this economy. The exact same expectation (in today’s case, uncertainty of future) is the result of millennials (new generation) to save more. However, this saving trend may not be the only thing that may hurt this economy in the long term. In fact, the LACK of savings may hurt the economy, and it is coming from the different generation. It may be the case that baby boomers (the group which faces the phase of retirement) do not have money to save, let alone not enough money that has been saved.

Well, lets start with the millennials. The current trend of savings is mostly coming from those under 50s. Furthermore, the debt of this group is another argument of consumption that is not healthy. Rather it is the misunderstanding of lifetime consumption something curve or not, the national debt is part of the cause of current trend of savings rate. Reported by Jeffery Sparshott of WSJ, the personal savings rate has increased to 5.8%, which is highest since 2013. Understanding that the consumer expectation is part of the deriving force behind the savings rate, the economy in its own is uncertain about how long this high savings rate would stay at this rate. Taking account of seasonal factor, it is still high rate compare to unprecedented economical boom in 1998, when the rate was around 4%.

While economists can be optimistic about a rebound of consumption (derived by decrease in savings rate), we may not be able to break into a happy dance. Unfortunately, a huge storm is approaching with retirement of baby boomers. The quote from an article by Benjamin Zhang of Business Insider will start my argument.

Baby Boomers have saved an average of $262,541, about a third of the $805,398 they predict they’ll need at retirement.

It is tragic. You see, politicians were not joking when they say there will be a burden for millennials to support retired baby boomers. It is not to be confused with the fact that the savings of baby boomers cannot be treated equally as savings made by millennials. However, the issue comes in when baby boomers try to consume, after depleting their own savings. The SSA can handle, but it will eventually be not enough to handle all. Even making it worse, millennilas would not be confident with the spendings, because of the fact that there will not be safe financial after-retirement support for them. Thus, millennilas will save, even more.

This kind of change in savings will not be an instant action, as retirements of baby boomers will not happen in a single day. However, it is to be noted that, because of the uncertainty that millennials face when it comes to post-retirement financial safety support, the savings rate will slowly clime up. And, I don’t have to explicitly say what changes that the consumption and aggregate economy will have to face.