The Blubber

You've likely come across discussions about the "great wealth transfer," the $72 trillion in assets that the baby boomer generation is currently holding and is expected to pass on to millennials. This transfer is seen as a potential solution to the financial challenges faced by the younger generation. However, there has been another, even more substantial wealth transfer over the past 40 years, and Bank of America Research highlights this phenomenon.

Bank of America is not the only entity to draw this conclusion. Renowned billionaire and former head of one of the world's largest hedge funds, Ray Dalio, mentioned a "coordinated government maneuver" in a LinkedIn post in August. This maneuver enriched household balance sheets while straining government finances. Although Dalio did not specify the generation involved, BofA has now elaborated on his observation.

Baby boomers have unquestionably been the primary beneficiaries of this "massive wealth transfer," as noted by the BofA research team, led by Ohsung Kwon. They echo Dalio's assertion that government policies implemented since the 1980s have led to a flow of trillions of dollars from the public sector to the private sector, precisely when the baby boomer generation was in the prime of their working years. BofA highlights the significant growth in government debt during this period, from 31% of GDP to 120%, and the reduction of the 10-year Treasury yield from 12% to today's 4.6% (as of the time of this statement, it stands at 4.9%).

So, how many trillions are involved? According to BofA's calculations, U.S. household net worth has surged from $17 trillion to $150 trillion over this period. Baby boomers, in addition to the "traditionalists," hold two-thirds of this total net worth, which amounts to $146 trillion. As a result, government policies have led to a wealth transfer of $129 trillion into the hands of these baby boomers and older Americans, although BofA did not specify the exact distribution of this wealth between the two groups.