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Grandparents to the Financial Rescue

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I heard it said one day that I would never be as rich as my parents. They were baby-boomers, the people that benefitted from the expansionary Thirty Glorious Years of the post-Second-World-War period. That was when jobs were for life and people earned enough to pay for the mortgage that didn’t cost hundreds of times more than you actually got in your pay-check. That was before the housing bubble came along to destroy the possibility of the younger generations getting anywhere in life. Wherever it is in the Western world, we have created capitalist societies in which the young are out of work and the oldsters have at least more money than their off-spring. But, even the people born in the 1960s and 1970s are worse off than those that were of their parents’ generations. Today the wealthier generations are the oldest according to studies that are being published.

The Institute of Fiscal Studies published a report last year that showed that those born in the 1970’s would need inherited wealth from their parents to make it anywhere in the world. For people in their thirties and forties today, meaning at the height of their professional careers, they will be in need of wealth from elsewhere just to be as well off as their own parents are in retirement. Andrew Hood a research economist at the Institute of Fiscal Studies stated: “Since the second world war, successive cohorts have enjoyed higher incomes and living standards than their parents. Yet the incomes and wealth of those born in the 1960s and 70s look no higher than the cohorts who came before them. As a result, younger cohorts are likely to have to rely on inheritances to be better off in retirement than their predecessors.”

The Urban Institute (the Washington-based think-tank) study suggested that those 30 and 40-somethings would not be able to build as much wealth as their parents. 
• Their net-worth has fallen by 21% since the start of the 1980s
• For those that are over the age of 74, net wealth has rocketed by 149%
• Why? Because wages have stagnated.
• Loan burdens have increased. 
• The younger generations were the hardest hit by the Great Recession since they had the highest loan burdens on their backs.
• There’s also the added problem of diminishing job opportunities.
• More and more people are educated and flood the market with the same degrees and diplomas, making competition greater. 
• 60% of Americans borrow to go to school these days (and there are 20 million that attend a college each year). 
• That’s alone a debt burden from education that amounts to $870 billion in outstanding debt. 
• Only 7.4% of those that are over the age of 40 still have outstanding college debts. 
• It’s 25% of those that are 30-something
• That’s the first time since the great Depression that such a scenario has been experienced by any American under the age of 40. 
• The average household income doubled between 1983 and 2010, however. 
• But, it didn’t go into the average household of those under the age of 40. 
• Average net-worth of people aged 56 to 64 saw a rise of 120% (from 1983).

Studies show that usually what happens is that as society becomes overall wealthier, then younger generations capitalize and build on the wealth of their parents’ generations. Today this is clearly not happening in the Western world. Are we finally to admit that our societies are not getting richer, but poorer?

How can the young debt-burdened workers afford to pay off their loans and to save for their retirement at the same time? Throw in the mortgage repayments and the rising transport and energy bills and you have right there the makings of a time-bomb. Not dealing with the problem today with governments concentrating their energy on failed-actions of the past like printing money, like austerity, like boosting the financial markets and the bolstering the banks will only mean that those 30 and 40-somethings will become more and more dependent in the future.

In the UK, it’s the grandparents that are giving the average amount of £300 to each grandchild during a given year to help them out these days. The parents don’t have the money. It’s the grandparents that are doing it. According to the UK report that has just been published there’s no motivation of feeling or love that is involved in donations of sums that have reached sometimes £50,000 in the UK, but, it’s all down to feeling forced to do so because the parents can’t afford to do it.

Are you better off than previous generations?

Originally posted: Grandparents to the Financial Rescue

 

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Thu, 06/26/2014 - 14:44 | 4898976 theyjustcantstop
theyjustcantstop's picture

theres a reason the govt., and pravda started at gen. x, gen.z is you, and your family as common-core govt. workers.

theres no difference between the govt., google, facebook, ge. a large portion of americas large co.,s, and 80% of americas commnications.

besides the 1%, the 99% will survive, just to survive, there will be no getting ahead.

a free country will not be anywhere to be found, within 6-7 yrs..

Thu, 06/26/2014 - 13:00 | 4898363 lawton2
lawton2's picture

It is pretty bad. I can't count the number of people aged 18 - 30's having to live in with their parents or grandparents due to not being able to afford a place themselves due to college debt burden - low wages etc. and the rest despite having a degree.

Thu, 06/26/2014 - 13:17 | 4898436 Gavrikon
Gavrikon's picture

It makes no sense to go deeply into a debt for, say, an engineering degree when you will never recoup the money because tech job salaries are shit these days.  They might seem relatively high, but the salaries have fallen steadily since 2000, not even counting inflation.  And why is this so?  Because we decided to provide relatively high paying jobs to Indians and others, both onshore and offshore.

Fuck America.  Protectionism in not a dirty word.  Affirmative action is bullshit.  Just giveaways to parasites like "free trade" is a giveaway to the globalist elites.

Thu, 06/26/2014 - 12:40 | 4898227 sondernauch
sondernauch's picture

I don't blame the boomers exactly for the current situation. What is intolerable is their smug attitude and belief that they earned all this wealth, that they deserve 40+ years of retirement, and that it wasn't stolen from their own children and grandchildren. All their life, as a group, they have had everything their way, have had all the luck, and now they want to claim that we are the spoiled and lazy ones and we just need to work harder, like these 50 million wonderful new third world immigrants. PHUQ!

Thu, 06/26/2014 - 13:16 | 4898411 Gavrikon
Gavrikon's picture

It is debt that has financed our "growth."  It is greed that has shipped jobs off shore, and imported cheap labor, "dismantling the ladders of upward mobility" as Paul Craig Roberts says.  It is the printing of money that has financed the support of parasites.  And yes, it was mostly done by us baby boomers, liberal and conservative.  We grew up on shit like "Poverty in America" and "Roots" and swallowed the propaganda whole.  We borrowed and borrowed and borrowed, publically and privately to finance both guns and butter.

Many of us were spoiled, coddled, and entirely self-centered.  (Go listen to Billy Joel's old song "My Life.")

Well, not all of us.  I was kicked out at 18, worked myself through school with no debt, and now I'm helping out my children and wife's family.  I'm very lucky that I have a skill and speak three languages and don't have to live in the fucked up USA.  I will work until I die and will help my kids as long as I have breath.  Because even though they DO have jobs and work their asses off, the above mentioned reasons have permanently fucked their chances of doing as well as I have.  And whenever I hear about confiscation and bail-ins and how we need to have higher taxes to support the "chillins" my blood pressure goes up enough to put me into an early grave.  Except for my family, I give not fuck one about ANYONE else.  I have my hands full with what I have to do now, still working two jobs.  

Here's my shoulder, young person.  I feel you, and my anger can't be much less than your own.

Thu, 06/26/2014 - 13:02 | 4898376 lawton2
lawton2's picture

I agree - the boomers want to act like the situation they were given has nothing to do with the debt problems now. The boomers also had a great job market where grads were almost guaranteed a decent job with a degree unlike now where half the grads are waiting tables years after graduation.

Thu, 06/26/2014 - 12:20 | 4898179 PGR88
PGR88's picture

These people grew up in the entertainment-media bubble, and vote for the "coolest" candidate the media creates for them.

 

 

Thu, 06/26/2014 - 11:57 | 4898066 PoliticalRefuge...
PoliticalRefugeefromCalif.'s picture

Well there is a reason the Federal gvt. is buying hollow points and militarizing every Fed agency..

I think they are scared of what is coming.

Thu, 06/26/2014 - 13:16 | 4898439 atthelake
atthelake's picture

Anyone with any sense is "scared of what is coming".

Thu, 06/26/2014 - 11:49 | 4898020 JRobby
JRobby's picture

This is the time bomb they fear. 20 and 30 year olds don't even know how fucked they are by the ponzi yet.

They are starting to get a clue, but not torch, pitchfork and AK level clue yet.

Spin Rx'ers are getting their attention with SS funding in their efforts to get that ended.

 

Thu, 06/26/2014 - 11:28 | 4897906 Canoe Driver
Canoe Driver's picture

Somebody adjust those net worth figures for inflation? If your grandparents bought their house in 1975 for 1/10 it's current value, and you adjust for inflation, they got screwed too.

Thu, 06/26/2014 - 11:52 | 4898027 PT
PT's picture

She adjusted the figures for inflation:

http://www.youtube.com/watch?v=akVL7QY0S8A

(Apologies to regulars for posting that same link yet another time.  I really should move on, but it is soooo appropriate to Canoe Driver's comment.)
(For newbies:  approx one hour, first six minutes are boring - skip if you must)

Fri, 06/27/2014 - 03:33 | 4901288 DontGive
DontGive's picture

The regulars don't mind. Most of 'em are mia.

Thu, 06/26/2014 - 11:25 | 4897883 Leraconteur
Leraconteur's picture

younger cohorts are likely to have to rely on inheritances to be better off in retirement than their predecessors

 

This is another datum point in the end-of-empire moment.

If each successive generation needs to consume the prior generations accumulated wealth to be better off, and Americans show no intention of stopping the spending frenzy, then eventually they will consume all past and current wealth as they attempt to live better off than mom and dad, grandpa and grandma.

I give the nation until 2061, no later. Boomers+Century

Thu, 06/26/2014 - 12:00 | 4898070 what's that smell
what's that smell's picture

"boomer boomer on the wall, who's the fairest generation of them all?"

"vanity is my favorite sin." The Devil

while they were busy performing auto-fellatio, the cockroaches, vultures, rats, hyena, sharks, and jackals ripped this bloody bitch limb from limb.

die, boomers, die.

Thu, 06/26/2014 - 11:23 | 4897872 DontGive
DontGive's picture

These generational poo slinging articles are junk. The turning is just starting. Wait till the old bitches get the rug pulled from under them. You think the looters are going to let them have their cake and eat it too? Trillions syphoned out last market blip, trillions more to come. 

A lot of wealth is disguised as an asset, which really is a liability that the private owners will transfer to the public dole. Old bitchez get fucked with inflation/looted retirements, young bitchez get fucked too with higher taxes, which they will have to pay with jobs they wont have have.

Thu, 06/26/2014 - 10:54 | 4897739 RaiZH
RaiZH's picture

Well I think it's best to reconsider what you see as being "better off"... but that's difficult being in a country full of mindless consumers!

Thu, 06/26/2014 - 10:26 | 4897620 lynnybee
lynnybee's picture

& the baby boomers are also the target of the looting via higher taxes, social security taxes, high property taxes & the boomers will also be the target of the looting yet to come via 401k confiscations & 'bail-ins' if needed.    the only way to leave anything to heirs is to privately hand them gold coins.  i have read that teh wealthiest families in the world have put away gold that won't see the light of day for hundreds of years, put away gold as their wealth to pass from generation to generation ..... we should, too.  

Thu, 06/26/2014 - 14:28 | 4898885 GubbermintWorker
GubbermintWorker's picture

77.93 Oz and climbing.

Thu, 06/26/2014 - 09:44 | 4897407 sodbuster
sodbuster's picture

Say thank you to your fed reserve and the spend, spend, spend, congress for absolutely destroying the value of the dollar, the last 60 years. LBJ declared a war on poverty- got news for everyone- poverty won.

Thu, 06/26/2014 - 10:22 | 4897607 andybee33
andybee33's picture

Do you really blame the Fed for this one?  I wonder if it isn't just down to a demographic bulge who learned they could use their bloated numbers to vote themselves largesse at everyone else's expense.  Tw@s!

Thu, 06/26/2014 - 16:18 | 4899495 sodbuster
sodbuster's picture

Absolutely,andybee. The fed has been an enabler all along. They are at the core of most of what is wrong. Was deficit spending a problem, before the fed? Did we have a huge national debt, before the fed? When the depression hit in the 30's, we were a creditor nation.

Thu, 06/26/2014 - 11:40 | 4897971 PT
PT's picture

Funny how the demographers only ever seem to notice half of the story.  We never hear:

The demographic bulge should lead to an oversupply of cheap family homes as the boomers trade into something smaller and more manageable, be it smaller home or coffin.
The demographic bulge should lead to an oversupply of teachers and the best education for the younger ones.
Never forget that the taxes of the parents of the boomers paid for the boomers' higher education.
As the boomers get older, consume less and die off, the demographic bulge should lead to oversupply of everything and cheaper prices for all.

The parents and the grandparents will use their hard earnt savings to help their (grand)children buy real estate or pay for an education, never realizing that all that extra money is purely driving prices up and nothing else.  Oh yes, your child will be able to outcompete someone else's child but on the whole it is all money down the shitter.  The banksters are laughing all the way to the ... oh, they're already there.

Thu, 06/26/2014 - 13:32 | 4898513 allgoodmen
allgoodmen's picture

Boomers refuse to step aside. The boomers, specifically the ones without cadillac retirements, are working and not retiring. Furthermore, they are cockblocking xers and millennials out of the good jobs. They voted themselves property tax relief and do not have to 1) leave their enarly empty houses and 2) pay property taxes for decent schools for the young.

Strauss and Howe are dead wrong, especially where they predicted Boomers would sacrifice protect and step aside for the Heroic young generation. The Boomers we see are the antithesis of their rosy prediction.

Thu, 06/26/2014 - 11:45 | 4897998 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Funny how the demographers only ever seem to notice half of the story. 

PT, this is true. It is going to take decades to play out. I am currently in my 30's and won't see these positives until at least my 50's. That is a huge chunk of my life to suffer.

Thu, 06/26/2014 - 12:04 | 4898102 PT
PT's picture

The boomers left uni a couple of decades ago, to be replaced by Gen-X.  Everyone complained that they couldn't afford to educate Gen-X despite a larger proportion of taxpayers.  Remember that the taxes of the boomer's parents educated the boomers.  Education should never have become more expensive.  You may have to wait a little longer to experience demographic effects on real estate prices but we already have a lot of empty homes artificially held off market.  Bailouts and fraud keep real estate prices above what any fundamentals, demographics or otherwise, would price it.

Thu, 06/26/2014 - 11:51 | 4898033 JRobby
JRobby's picture

Immigration

Thu, 06/26/2014 - 12:54 | 4898344 Gavrikon
Gavrikon's picture

Job offshoring, free trade, importation of cheap labor.  I can't see why the retards can't see it.

Fri, 06/27/2014 - 12:08 | 4897841 RaceToTheBottom
RaceToTheBottom's picture

The Fractional lending and Repothications and situational ethics are a huge multiplier on a demographically driven boom.  

But those same structural defaults are a bitch on the downside of the boom.

Thu, 06/26/2014 - 10:26 | 4897618 RevRex
RevRex's picture

This is the Hoax and Chains America voted for......deal with it.

Thu, 06/26/2014 - 13:12 | 4898418 atthelake
atthelake's picture

Since democrats and republicans are owned by the same corporations, foreign govts, special interests and crazy oligarchs, the end result, probably, would have been very similar, had the other major candidate won.

Thu, 06/26/2014 - 11:52 | 4898037 JRobby
JRobby's picture

Harsh!

 

But true

Thu, 06/26/2014 - 12:05 | 4898108 dontgoforit
dontgoforit's picture

I have a close friend who retired in the 80's from a major oil outfit. She had over $400k in cash and her house paid for. Over the ensuing 20 years her son and his wife, their 4 children and now 4 grandchildren wound up with every dime of that 400K.  She's debt free with SS and a pension, but all that money was used to keep her son's family afloat.

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