Soaring inflation is putting markets on edge and triggering fears of a recession. The latest consumer price index data this week revealed a searing 9.1% increase year over year in June, prompting Treasury Secretary Janet Yellen to say that inflation in the U.S. is “unacceptably high.”
The causes include high commodity and energy prices triggered by supply shortages and Russia’s war in Ukraine, record government spending packages on economic stimulus and low interest rates amid the pandemic, and continuing labor shortages and supply chain problems meeting increased demand.
But one investor is arguing that there’s another major factor to blame: millennials.
“See, what everyone is not including in the conversation is what really causes inflation, which is too many people with too much money chasing too few goods,” Bill Smead, chief investment officer at Smead Capital Management, told CNBC’s “Squawk Box Europe” on Thursday.
Smead explained that in the U.S. there are an estimated 92 million millennials, primarily in the 27- to 42-year-old age bracket. “The last time we saw what we call ‘wolverine inflation’ — which is inflation that is hard for policymakers to stop — was when 75 million baby boomers had replaced 44 million silent generation people in the 1970s.”
“So we have in the United States a whole lot of people, (aged) 27 to 42, who postponed homebuying, car buying, for about seven years later than most generations,” he said.
“But in the past two years they’ve all entered the party together, and this is just the beginning of a 10-to-12-year time period where there’s about 50% more people that are wanting these things than there were in the prior group.”
“So the Fed can tighten credit, but it won’t reduce the number of people wanting these necessities in comparison to the prior group,” Smead said.
