>The vote for Brexit and the election of Donald Trump has baffled the main stream and the establishment. Most market participants and observers didn't believe ex ante that they were possible, and as a result were completely surprised when the unexpected happened. Ever since the term populism has become socio-politically relevant in modern-day public discourse. Google Trends illustrates that there was a veritable explosion in search queries for the term “populism” last year.
>But, populism — regardless of its political flavor — merely represents a symptom. The generally surprising results were consequences of the economical erosion of the past years. Although there are idiosyncrasies in every country that foster the rise of populist movements, the ailing foundation of the economy provides the fertile soil and is the major driver of people's dissatisfaction and the associated voting decisions. To assert that populism is the reason for this process of political change is in our opinion far too simplistic. An analysis of stating that economic erosion is responsible for the rise in populism is supported by by a McKinsey study, which examines the trend in real household incomes in 25 industrialized nations.1 McKinsey arrived at the striking conclusion that real incomes of 65 to 70 percent of households in developed countries either stagnated or even declined between 2005 and 2014. The following chart illustrates the trend in household incomes in selected countries. (The y axis shows the percentage of households with stagnating or declining income between 2005 and 2014)
[see pic1]
>The momentousness of this study becomes obvious when considering that the object under review are 25 industrialized countries with a population of more than 800 million people, generating 50 percent of global GDP.
>Moreover, numerous studies show that the opportunities and expectations of coming generations to earn more than their parents have worsened significantly. While the probability that members of the baby boomer generation would earn more than their parents was 62%, this probability has declined to 50% for generations born since 1980.2 Income equality has deteriorated dramatically over time as well. The share of national income earned by the bottom 90% of the US population has decreased from 66% in 1980 to 50% today.3 Contrary to the picture painted by numerous macroeconomic statistics, the economic situation is apparently not as bright as it is often portrayed.
>What cannot be quantified by statistical aggregates is the cause of the economic erosion suffered by the middle class, which can ultimately be traced back to our monetary system. The low interest rate environment orchestrated by central banks has not only failed to solve our economic problems, but is – in keeping with the business cycle theory developed by Mises and Hayek – the very cause of the business cycle.
– https://mises.org/wire/why-populism-isnt-going-away
They did this whole study, showed that the effects began around 2004 and then came up with a generic explanation that applies going back to at least the Fed's foundation if not more, and don't explain what changed in 2004. You and I know what changed, the boomers are retiring and participating less in the economy. Following behind them is a lack of babies to fill the void left. I am continuously amazed to watch economists fail to see that babies = economy. This is because these economists never existed prior to the baby boom and make the assumption that the economic activity of those times is a fundamental that can't change. [pic2]