Millennials Are The Deflation Generation

While the world’s central banks struggle with deflation, millennials (those born between 1980 – 2000) are busy creating a world where persistently lower prices will be an economic cornerstone. ‘A feature, not a bug,’ as they say in the tech world.
The immediate reason for that is simple: our cohort got stuck with educational hyperinflation, something economists miss when they look at the headline numbers. Education is only 6% of the CPI basket. For millennials, that number can easily exceed 20% because of student loans. We are therefore turning to a new tech-enabled service economy to help us make ends meet, and the majority of these new services are profoundly ‘Disruptive’ to old business models.
‘Disruption’ is often code for ‘deflation’, since more taxis (Uber), hotel rooms (Airbnb), food delivery (too many examples to mention) means more price competition. And when the next wave of disruption comes along to put the current crop of ‘Disruptors’ out of business, we’ll switch to them. Deflation will be permanent, and we’re OK with that. And when my cohort runs the Fed, or the ECB, or the BoJ, we will be unlikely to care if prices decline. We may even consider it the sign of a successful economy that serves its citizens well.

This post was published at Zero Hedge on 03/08/2016.