Millennials are probably one of the most unfortunate
generations — from an economic and financial prospective — the world has seen
in quite some time. This group of humans was born in a time of paradigm shifts
in technology, culture, innovation, and wealth redistribution.
اضافة اعلان
Throughout history, disasters, wars, and catastrophes
have been followed by growth, prosperity, and opportunity. During the past three
decades, different wars were started and peace was made, who and how people
were allowed to choose spouses and partners changed, financial markets crashed
bankrupting millions and spiked again to mint fresh billionaires, and diseases
killed millions while medicine increased the lifespans of billions.
This all sounds like just another chapter in human
history, but what’s different this time around is one small thing — the speed
at which all these things happened, all driven by one factor; the internet.
In this piece; I,
a millennial, will discuss life
from my point of view as an economist/technologist/human that has went through
what I like to call, “life fast forwarded”.
To better understand the depth of this generation, we need
to touch on a few points. We all know the story of how big of a deal the
internet is, so let’s skip right through how big of a deal the internet is and
focus on people and their health.
Number 1: A blessing and a curse, the internet has changed
the way societies grow, collapse, prosper, and fail. With prior generations,
class distinctions affected how people have been impacted by the internet, however,
generation Y (or millennials) was most impacted as they were introduced to the
internet in the midst of core societal reform. It was a phase of out with the
old and in with the new.
This was the proof of concept generation; the generation
that was tested on, and experimented with, it is a period in history where the
fabric of the economy changed. I mean, the world’s most valuable commodity —
data — is intangible!
Number 2: Monetary theory is a scientific field that studies
the creation and transfer of value in an economy by reflecting value in money.
Money helps us understand how to price products and services, and allows us to
transact them globally.
Any economy, whether it be a bartering system or the modern
digital economy, is based on the frequency and volume of value (money) the
economy generates.
The general price levels of goods and services is
proportional to the supply of money in an economy. A key takeaway I want you to
hold on to for a minute is the Fisher Equation, which helps us fundamentally
understand prices and their behavior.
According to the theory, price behavior can be quantified
using the measure; a. the velocity of money (the speed with which money moves
from one person to the other, we’ll use “V” to represent this) and b. the
volume or quantity of money in supply as an overall quantity (M). In its
simplest form, it looks like this: (M)(V) =(P)(T)
where:
M=Money supply
V=Velocity of circulation (the number of times money changes hands)
P=Average price level
T=Volume of transactions of goods and services
Okay, enough with the boring stuff. To keep this brief, we will only focus
on how this affects the millennials’ generation.
As with the predecessors, we had our fair share of disaster and
prosperity, and innovation and catastrophe. However, ours was fairly magnified
in a psychological sense. Thanks to the good old internet you can now look at a
glass screen for 7 seconds and develop a great deal of anxiety, excitement,
warmth, or fear.
This rapid sequential shift in emotions would happen over weeks in the
case of a normal person living in the 40s, whereas, it’s happening on an hourly
basis with millennials. Put simply, we are being fed raw suspense-free content
that directly impacts our emotions and stirs our feelings at a rate that is
unseen and that perhaps us humans are not ready for.
Simply skimming through social media, a random algorithm can feed you four
back-to-back stories with the first triggering your compassion for an orphan in
Africa, followed by a panda falling off a tree that triggers a giggle, followed
by a post of a 12-year-old youtuber who makes more money unboxing toys in a
single day than you probably made in a full year of soul-draining employment,
triggering frustration that is followed by some inspirational quotes that
trigger ambition and enthusiasm. This roller-coaster of emotion can create a
personality that has the tendency to fluctuate, be naturally indecisive,
uncertain, overly optimistic, or pessimistic simultaneously.
Over the past 2 decades alone there have been a handful of wars that
relocated people and reshaped the global economy, which is still nothing new. However,
this time around, humans have been dosed up on emotion to an alternative
virtual reality. We are a trend following crowd, as with other generations,
however, ours has to deal with magnified excitement and panic, and we are
evolving into a more impulsive generation due to the rapid speed at which data
around the world spreads.
The first phone was invented over 140 years ago and took about a
century to become a staple in every home, where as the first smart phone was
created in 1992 by IBM and now over 60 percent of the population on earth has a
smartphone in their hand.
As the future unwinds things are only going to spread quicker. This
quick spread of everything, accompanied by an increase in herd like behavior
due to globalization, means humans now have to mitigate risk and adapt to
changes much quicker, leaving less time for things to sink in and resonate.
By the third month of the
COVID outbreak, the United States along with
the world’s leading economies began the largest monetary experiment in history
in an effort to swiftly and quickly mitigate the risks associated with lockdowns
and try desperately to control damage to the economy by increasing the “M” money
supply to levels unseen before. By the first year of the outbreak the United
States alone spent more in money through quantitative easing (a form of
lowering the cost of borrowing through the purchasing of financial securities
to inject money into the economy) than it did in both world wars.
This excess cash available to borrow by banks and financial
institutions from the government is intended to incentivize banks to take
advantage of cheaper money that they can loan out to citizens and stimulate
growth, increasing “V”, the velocity, of circulation from our formula above. In
other words, central banks all around the world feared that due to the
lockdowns and freezing of commercial activities the economy will slow down and
cause deflation.
This is all fairly straight forward, however, there is a catch this time;
the only way governments can make money go straight into the economy is to
lower its costs to banks in order for banks to lower its cost for people, but
what is happening today is not as the US Federal Reserve expected; in fact
banks are borrowing money and hoarding it as they await interest rates to rise.
This time however, the magnitude of quantitative easing is larger than
any other time in the past and more importantly, the speed with which the
decision was taken to implement easing was faster than anyone ever expected,
which raises the question; did the US Fed rush into action and impulsively
overdrive the economy with debt? It seems like it. Which raises yet another
question: Is the global market being influenced by a millennial majority.
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