We’re living in the ‘G-shaped economy’—where boomers control $90 trillion, and everyone else waits

The continued resilience of consumer spending despite multiple shocks in recent years has puzzled economists, many of whom have attributed it to the wealthiest households driving most of the growth. The wealth effect from soaring stocks fuels consumption, while Americans without big investment portfolios have been forced to retreat amid elevated inflation and a stagnant job market. But this notion of a K-shaped economy divided by class obscures a trend divided by generations, according to Wall Street veteran Ed Yardeni, who has dubbed it the G-shaped economy. In a note early this month, he argued that baby boomers are the real driving force behind consumer spending, which accounts for roughly 70% of U.S. GDP, and detailed how much that generation dominates the economy. That will soon be augmented by the Silent Generation, which will pass on much of their $20 trillion to their boomer kids. “The concentration of wealth among older generations suggests that consumer spending is increasingly being supported by the spending of accumulated retirement wealth rather than labor income,” Yardeni explained. Meanwhile, boomers are largely insulated from the labor market, which AI could disrupt. Since they are already retired or approaching retirement, they don’t base their spending on wage growth, hiring conditions, or job security, Yardeni pointed out. A report last month from Visa Business and Economic Insights found that a quarter of millennial homeowners got help on the down payment from their parents and wouldn’t have been able to buy their current home without it. “Rather than waiting to pass down inheritances later, many boomers are using their wealth to help their children clear major financial hurdles now, when the support will have the greatest impact,” Visa said. Despite being the wealthiest generation, boomers are still burdened by significant debt, including mortgages, credit cards, and auto loans; borrowing against brokerage accounts and other investments; and personal and business loans. “Taken together, the high share of cost-burdened older homeowners and substantial non-mortgage debt indicate that many baby boomers have far less financial flexibility—and potentially less wealth to pass on—than headline figures might suggest,” Visa said.