This paper explores whether changes in the age distribution have significant effects on financial markets that are rational and forward-looking. It presents an overlapping generations model in which agents make a portfolio decision over stocks and bonds when saving for retirement- Using the model to simulate a baby boom-baby bust demonstrates that returns to baby boomers will be substantially below returns to earlier generations, even when markets are rational and forward-looking. This result is important because the current debate over how to reform pay-as-you-go pension systems often takes historical returns on financial assets—and on the equity premium—as given.

This paper addresses two issues. The first is whether demographic change was plausibly responsible for the run-up in stock prices over the last decade, and whether the attempt by the baby boom cohort to cash out of its investments in the period 2010-30 might lead to an quot;asset meltdown.quot; The second issue is whether the rise in dependency that will accompany the retirement of the baby boom cohort calls for an increase in national saving. We analyze these issues using a forward-looking macro-demographic model, and show that they are related via the existence of installation costs for capital. If such costs are sufficiently large, then demographics do have the power to affect stock prices, but quot;saving for America's old agequot; is less optimal. However, conventional estimates of capital installation costs are not large enough to explain large stock price movements in response to actual demographic change.

Look around you and think for a minute: Is America too crowded? For years, we have been warned about the looming danger of overpopulation: people jostling for space on a planet that’s busting at the seams and running out of oil and food and land and everything else. It’s all bunk. The “population bomb” never exploded. Instead, statistics from around the world make clear that since the 1970s, we’ve been facing exactly the opposite problem: people are having too few babies. Population growth has been slowing for two generations. The world’s population will peak, and then begin shrinking, within the next fifty years. In some countries, it’s already started. Japan, for instance, will be half its current size by the end of the century. In Italy, there are already more deaths than births every year. China’s One-Child Policy has left that country without enough women to marry its men, not enough young people to support the country’s elderly, and an impending population contraction that has the ruling class terrified. And all of this is coming to America, too. In fact, it’s already here. Middle-class Americans have their own, informal one-child policy these days. And an alarming number of upscale professionals don’t even go that far—they have dogs, not kids. In fact, if it weren’t for the wave of immigration we experienced over the last thirty years, the United States would be on the verge of shrinking, too. What happened? Everything about modern life—from Bugaboo strollers to insane college tuition to government regulations—has pushed Americans in a single direction, making it harder to have children. And making the people who do still want to have children feel like second-class citizens. What to Expect When No One’s Expecting explains why the population implosion happened and how it is remaking culture, the economy, and politics both at home and around the world. Because if America wants to continue to lead the world, we need to have more babies.

Why do stock and housing markets sometimes experience amazing booms followed by massive busts and why is this happening more and more frequently? In order to answer these questions, William Quinn and John D. Turner take us on a riveting ride through the history of financial bubbles, visiting, among other places, Paris and London in 1720, Latin America in the 1820s, Melbourne in the 1880s, New York in the 1920s, Tokyo in the 1980s, Silicon Valley in the 1990s and Shanghai in the 2000s. As they do so, they help us understand why bubbles happen, and why some have catastrophic economic, social and political consequences whilst others have actually benefited society. They reveal that bubbles start when investors and speculators react to new technology or political initiatives, showing that our ability to predict future bubbles will ultimately come down to being able to predict these sparks.

“A lucid and vivid account of the combined flawed social policies and ingrained corporate attitudes that have brought the US economy to its knees.” —Dr. Ronald Manheimer, former executive director, North Carolina Center for Creative Retirement Baby Boomer Bust? examines and analyzes the meltdown of 2008/2009 from economic, political, and social perspectives and illuminates how the meltdown has directly impacted Baby Boomers—once known as the generation of promise, but now the generation of panic. It examines the downturn’s impact on Boomers’ lifestyles, dreams, aspirations, and future plans. Baby Boomer Bust? raises some provocative questions regarding the generations ability to survive the worst economic downturn since the Great Depression “A revealing insight into the effects of the recent economic downturn on the very generation that helped to create one of the world’s most powerful and influential economies. Mr. Chiocchi’s examination brings into sharp relief some of the more salient, and subtle, social-consequences of one of the greatest economic disasters in the history of Western civilization.” —Michael J. Formica, MS, MA, EdM, psychotherapist, social scientist “A sobering view of the underside of the economic meltdown.” —Jerry Shereshewsky, CEO, Grandparents.com

In the decade to come, an important development will be the retirement of a substantial proportion of the baby-boom generation ¿ the segment of the population born between 1946 and 1964, whose oldest members turned 62 in 2008. This report focuses on what could happen in one area: the demand for assets, particularly financial assets, such as stocks and bonds. Some economists have warned of the possibility of a dramatic decline in demand as baby boomers sell off their assets to finance consumption in retirement; they assert that the sell-off could cause a dramatic decline in prices. An evaluation of the evidence, however, indicates that such a dramatic decline in asset demand and prices is unlikely. Charts and tables.