There is no shortage of scapegoats to finger in the credit boom and bust. Exotic derivatives, overcompensated executives, Alan Greenspan, the SEC, reckless borrowers -- all have worn the scarlet letter at one point or another. But the list has not yet been exhausted. Baby boomers, it's your turn.

The Baby Boom lasted from 1946 to 1964, and some 78 million American children were born during that time. As this cohort ages, its sheer size overshadows the rest of society. If you look at an "age pyramid" for the U.S. (shown below), the baby boomers are the metaphorical bulge in the python's throat. 

As this bulge moves from bottom to top, it is having a dramatic impact on the economy. Indeed, the impact is so large that there are hedge fund managers that specialize in picking stocks that will benefit from boomers' buying habits ("Go long on denture manufacturers!").

The big question, of course, is what happens when boomers start to retire. The oldest of them became eligible for Social Security in 2008, and as we move forward in time, more and more of the bulge will switch from middle age -- when they're busy earning and spending -- to retirement, when they start to draw down on their savings. According to the "age wave theory," popularized by money manager Harry Dent in the late 1990s, when the boomers hit this transition point, the U.S. will enter a long bear market, as new retirees start tapping into their pension funds and 401(k)'s, selling their stocks and bonds to pay for their golden years.

Seen in this light, the credit boom and bust was almost an inevitable byproduct of demographics. As the boomers hit their peak spending and borrowing years in the late 1990s and 2000s, they splurged on second homes, SUVs, and went crazy on credit. At the same time, pension funds and retirement accounts peaked in size. There was more money than ever, since boomers had entered their final decade before retirement, and fund managers grew desperate to find attractive returns for the huge piles of cash they managed. Hence, when charming bank salesmen came bearing AAA-rated CDOs backed by subprime mortgages, it was an offer they couldn't refuse. The subsequent crash marked the turning point, after which the boomers will buckle down, try to rebuild their nest eggs in the final years before retirement, and soon thereafter start to draw down on the assets they've accumulated over a lifespan.

This is basically what happened to Japan, which experienced an enormous asset boom in the 1980s -- at one point the land around Tokyo's Imperial Palace was worth more than the entire state of California -- and then a crash in 1990. In the subsequent two decades, the country has grown very little or not at all. The investment managers at Sitka Pacific Capital chalk it up to the factors described above. In the company's most recent investor newsletter, they write:

What happened in Japan in the 1990s was a demographic shift into retirement, where a large portion of the population went from a lifestyle of earning, saving and spending to a lifestyle of not earning, living off assets and spending less. This resulted in less demand for investments like stocks, less demand for housing, and less demand for material 'things' -- and the prices of all these fell.

Today the Nikkei is about 75 percent below its 1989 high. Sitka thinks that the U.S. is "now starting a similar demographic shift into retirement, and that has coincided with what appears to be a peak in spending and debt." If they're right, the current bear market isn't a mere hiccup or even an indicator of a particularly nasty recession -- it's the start of a decades-long slide. (See Sitka advisor Mike Shedlock's blog for more background.)

Is the U.S. really at the same point? One piece of evidence suggests that it is: in 1990, near the start of Japan's woes, the median age was 37.4 years, meaning half the population was older than that. The U.S. today has a median age of 38 years. We're at roughly the same demographic place that Japan was at 20 years ago. Will we face the same future?        

Store this one away in your data bank of random trivia: flight attendants are getting older. Between 1980 and 2007, the median age of flight attendants jumped up 14 years--from 30 to 2004--according to a new study by two Texas A&M researchers.

Why? Civil rights laws made it illegal to discriminate on the basis of age, sex, or race, which meant the airline industry's historical predilection for hiring young, slim, attractive, unmarried ladies had to go by the wayside (there were actually weight and marital requirements back in the day). In subsequent years, which brought rounds of layoffs and hiring freezes, the youngest employees with the lowest seniority levels were often the first to get the boot.

It bears all the markers of bigger trends in the American workforce, albeit on an extreme scale (in the same time period, the median age of all U.S. workers rose six years). While the racial, ethnic, and gender composition of the flight attendant population diversified, inflation-adjusted median hourly wages dropped 26 percent. At the same time, that perennial glass ceiling crept into the equation; while female flight attendants used to make more than their male co-workers--who were probably less senior--they now make slightly less.

There's a cautionary tale here, too. As the economic crisis batters the airline industry harder than ever, its flight attendants are likely to get even older--along with its pilots, who aged six years, and its mechanics, who aged four. In fact, they might even get older at an increasing rate as workers postpone their retirement, putting an additional strain on the industry in the form of health care costs.

So I guess this means Ms. Britney Spears' futuristic imagining of tomorrow's flight attendants won't come to pass...?

The green shoots keep coming in the US, but Continental Europe is still in a deep economic slump. I keep seeing forecasters changing their predictions of recovery from 2010 to 2011. One important reason for this is denial. The IMF expects that financial sector write-downs in Europe are going to be even bigger than in the US over the next year or so, in large part because of trouble in the German banking sector. Yet while both the US and UK governments are busy dealing with their broken financial systems, Europe still has its head in the sand.

I just edited a very interesting piece from our European economic correspondent Stefan Theil, which will appear in next week’s international magazine, looking at Germany’s banking mess, which is (incredibly) even bigger than America’s. It’s amazing that both Merkel and Germany finance minister Peter Steinbruck groan on about the moral failings of Anglo-American capitalism, when their own banks were in many cases more highly leveraged than Wall Street’s, and doing a worse job at investing in all those risky assets, to boot.

As Theil writes, it’s no wonder that politicians in Germany don’t want to face the music – they are deeply implicated in the problems, as some of them sat on the boards of imploding banks, or set unrealistic profit targets for state owned banks in order to generate money to bolster bloated public budgets. Germany as a nation has done the right thing this week by setting a goal to balance its public budgets by 2016. But until it stops focusing on existential worries about capitalism, and starts cleaning up its own screwed up banking sector, recovery will be elusive.

Not So Fast, Fiat: The Supreme Court put a hold on the bankruptcy sale of Chrysler to Italian carmaker Fiat, citing the objections of three Indiana state funds and consumer groups. Fiat says it's in it for the duration, but the delay could put the ailing car giant at risk of going out of business.

Oy Vey, Eastern Europe: Israeli companies, heavily invested in Eastern European markets, are facing bankruptcy risks as a result of the region's severe downturn.

The Wisdom of the '80s: Want a PPIP that works? Make it more like the RTC--the Resolution Trust Corporation--the public-private partnership charged with mopping up the mess left by the S&L crisis.

Today in Unexpected Recovery: Kazakhstan's economy has already hit bottom and headed back to growth. The prime minister told a government meeting chaired by the president that he has seen a "positive trend" since March.

Don't Regulate Me, Bro: Sifma's CEO says Wall Street has issued its mea culpas and is on board for the coming regulatory overhaul. Not exactly, counter Gillian Tett and Aline Van Duyn, reporting that the turf wars over the financial sector's brave new world are just beginning.