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Are You Ready For The Coming Debt Revolution?
Submitted by Bill Bonner via Bonner & Partners,
There is a specter haunting America… and all the developed nations of the world. It is the specter of a debt revolution.
We left off yesterday talking about how the economy of the last 30 years – and especially that of the last six years – has favored the old over the young.
“Rise up, ye young’uns,” we as much as said, “you have nothing to lose but your parents’ debts.”
We showed how the value of U.S. corporate equity, mainly held by older people, had multiplied by 28 times since 1981.
That was no honest bull market in stocks; it was a market sent soaring by an explosion of credit.
But what did it do for young people whose only assets are their time and their youthful energy?
Alas, the real economy has increased by only five times over the same period.
A Grim and Menacing Specter
And when you look more closely at work and wages, the specter grows grimmer and more menacing. Average hourly wages have barely budged in the last 30 years. And average household incomes have fallen – from $57,000 to $52,000 – in the 21st century.
But as our fingers came to rest yesterday, there was one question hanging in the air, like the smoke from an exploded hand grenade: Why? Was this huge shift – of trillions of dollars of wealth from young working people to old asset holders – an accident?
Was it just the maturing of a market economy in the electronic age? Was it because China took the capitalist road in 1979? Or because robots were competing with young people for jobs?
Nope… on all three counts.
First, old people, not young people, control government. Ultra-wealthy campaign funders like Sheldon Adelman and the Koch brothers were all born in the 1930s. The big money comes from wealthy geezers like these, eager to buy candidates early in the season when they are still relatively cheap. Old companies fund most Washington lobbyists, too. And old people decide elections: There are a lot of them… and they vote. They know where the money is.
Second, the government – doing the bidding of old people – restricts competition, subsidizes well-entrenched industries, raises the cost of employing young people, and directs its bailouts, cheap credit, and contracts to the graybeards.
Third, the credit-based money system increases the profits and prices of existing capital. It encourages borrowing and spending. This rewards the current generation while pushing the costs into the future.
Grandparents Prey on Grandchildren
None of this was an accident. None of it would have happened without the active intervention of the old folks, using the government to get what they could never have gotten honestly.
This is not the same as saying they were completely aware of what they were doing and what consequences their actions would have. We doubt the Nixon administration had any idea what would happen after it tore up the Bretton Woods monetary system in 1971. It was behind the eight ball, fearing foreign governments would call away America’s gold.
Few in the White House realized they had made such a calamitous mistake when the president ended the convertibility of the dollar into gold.
And yet it created a world in which parents and grandparents could prey on their grandchildren… for the next 44 years. And it’s still not over.
The new credit money – which could be borrowed into existence with no need for any savings or gold backing – was just what old people needed.
We have estimated that it increased spending by about $33 trillion over and above what the old, gold-backed system would have allowed. That spending lifted the value of the geezers’ assets and increased their living standards. Meanwhile, the average 25-year-old reporting for work in 2015 can’t expect a single dollar more in real hourly wages than his father did in 1980.
The total value of outstanding U.S. corporate bonds was 17% of GDP in 1981. Now, it’s $11.6 trillion – or 65% of GDP.
What did corporations use that money for?
Some of it went into capital investment that made companies more productive and more profitable. But much of it went where you would expect it to go: to buy back shares… to acquire other companies at inflated prices… and to pay off executives as the value of their share options went up!
Who did this benefit? Mostly people over 50.
Government debt is even worse. Unlike most personal debt, it doesn’t go to the grave with the person who borrowed it. It sticks around to burden the next generation – who got nothing from it.
Federal debt in 1980 was less than $1 trillion. Today, it is $18 trillion. That money was used to fund federal programs – few of which provided any benefit to young people.
An accident? A mistake? Partly. But old people must have known what they were doing.
Their lobbyists asked for the spending. Their politicians voted for it. Their companies enjoyed the revenues. And they pocketed much of the money. When the economy threatened a correction, they demanded more credit on easier terms to keep the money flowing. And when their credit balloon popped in 2008, they whined to the feds to protect their ill-gotten gains.
Honest capitalism? Not if they could prevent it.
Creative destruction? Not on their watch.
Pay for what you get? Not if they could put the bills on the next generation.
Young people of the world, unite!
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Roosevelt wasn't a boomer when he began Social Security
Truman wasn't a boomer when he took the military to Korea.
JFK wasn't a boomer when he took us to Vietnam
Johnson wasn't a boomer when he lied about the Gulf of Tonkin and started the War on Poverty
Nixon wasn't a boomer when he took us off the Gold standard, when he opened up China to help the Corporations off shore production and declared the war on Drugs.
Reagan wasn't a boomer when he broke all records in government borrowing.
Bush I wasn't a boomer when he decided to invade Iraq.
Finally by Clinton we get to the first generation boomer. 1993.
Bill says it's the old people that control,but, boomers were not old during the time he accuses them of raping and pillaging our innocent young.
He denigrates millions in his generation for what a very few, including him, did.
What he says is nonsensical.
All eyes on Greece.. NEXT; Class action BANKRUPTCY.. LoL. It will start with the Student loans.
T'was not an explosion of credit. One stopped reading there. T'was an explosion of debt. Not the same in any way, shape, nor form.
Wisdom and treachery will defeat youth and strength every time. I read that somewhere a long time ago.
And in your world, Parents and Grandparents do nothing for their offspring, like support them through their early years into youth and into work and act as babysitters when required. Ever hear of the bank of Mom and Dad?
And in conclusion, for the vast majority of people, better any fiat money is in the hands of friendly, protective, reliable and generous people, rather then the Government, where the money would disappear into the ether, to support alll sorts of campaigns and 'vote winning' projects.
This is inane. The fact is, the current senior demographic will withdraw from the "system" far more than was contributed. The current junior demographic will contribute far more than they can ever hope to withdraw, if anything at all.
Okay, just give me back half of what I have paid over 30 years and then allow me to opt out. Hell, connected govt employees (Chicago teachers, USPS come to mind) have paid nothing at all. I want to opt out, like them.
Among younger people, suicides attributed to student loan debt and credit card debt are grossly underreported.
At some point they are going to stop killing themselves and start killing their debt masters.
Anyone stupid enough to kill themselves over debt, well let's just chalk that up to natural selection.
As for "debt masters," you must be referring to the 65+ crowd who are "owed" medicare and SS, because they "paid into it."
A little thank you from my "debt masters" would be in order, as my payments today allows their ATM withdrawals and colonoscopies tommorrow. I have no such illusions concerning my own future.
Yes, government subsidies* for private credit creation allow those with equity, typically the old, to steal purchasing power from those without equity, typically the young.
The solution then is to eliminate those subsidies and provide restitution to the victims, not return to a government subsidy on the price of gold and to an arbitrary limit (eg. the mining rate of gold) on the creation rate of fiat. Otherwise, we simply replace one form of theft, by inflation for the sake of the banks and the so-called creditworthy, with another, for the sake of gold owners and for those who profit by deflation (eg. money hoarders and money lenders).
* These subsidies include:
1) government deposit insurance instead of a Postal Savings Service (that makes no loans and pays no interest) for the risk-free storage of and transactions of government money, fiat.
2) a fiat creator/lender, the central bank, for the sake of the banks. Only the monetary sovereign (eg. US Treasury) should be able to create fiat and that fiat should be inexpensive to avoid the misuse of the taxation authority and power of government for the sake of private interests (such as gold owners) and to avoid an arbitrary limit (eg. the mining rate of gold) on the creation rate of fiat.
3) the paying of interest by the monetary sovereign (eg. US Treasury) on its debt since such interest is unnecessary and thus constitutes welfare for the rich and banks.
well i am not in the CLUB,, do not belong to skull and bones, never voted for one law in congress, never said to hank paulson," take the money it's yours"..never decided for "police actions" across the globe
I am guilty of not killing some folks, for why..well I have cars and a home and food every night, I can live like a king vs those souls in America of 18th century. I can travel anywhere most can go in the world..
I do not kill for politics or the rights of some group..no i see the evil that is .gov - and the day the .gov takes from me that which I can not abide- that is the day some folks get killed..
so blame me for not killing the snakes at top of this modern world. for that is the only solution, "power comes from the barrel of a gun"
pure fantasy nonsense, as though the current older generation were selfish & greedy while the current younger generation is just a powerless victim
this cycle of the-generation-in-power consuming everything it can get or create at the expense of everyone has been in place since Roosevelt's new screw-job deal
the current younger generation, despite claiming cloak of victimhood, will also do everything possible to grab, steal, create, tax and borrow to benefit themseleves at the expense of all future generations -
it is called "human nature"
old mice, young mice - shouldn't we be blaming the cats.
Just one more divide and conquer attempt.
Working class old people are the same as working class youth. NO DIFFERENCE.
Government subsidized private credit creation creates endless contention, eg:
1) borrowers versus savers.
2) the old versus the young.
3) employers versus employees.
4) workers versus consumers.
5) the so-called creditworthy versus the poor.
6) domestic workers versus migrant labor.
7) etc., etc.
And for what? The benefits of endogenous money creation? But shares in equity, common stock, is an ETHICAL form of private money creation that shares wealth and power rather than steal them. But why would those with equity share when government subsidized private credit creation allows them to steal instead? Especially since if they don't steal, their competitors will?
"Neither a borrower nor a lender be."
Yes, Polonius was an old fool. But these words of his are as wise today as they were then.
In my best old crotchity voice:
Don't you mess with my Social Security!!!!!!!!!!!!
Hairball, please imagine your 50-year-old self, preparing for the future. You make biweekly payments to a benefits program that you know you will never collect on. Being a realistic person, you hedge accordingly.
If you ask nicely, maybe I will keep working and paying so you can hit the ATM every few weeks. When you pull that wad of cash, just a moment of silent thanks would be appreciated. Keep in mind, not every SS contributor to your ATM is not so easy to please.
When a critical mass of SS contributors realize they are paying for a benefit they will never receive, this is where the sci-fi scenarios kick in.
Don't mess with "my" social security"? Why shouldn't I, when you are fucking with my reality.
This is a good "Tongue in Cheek" article, although many readers here do not recognize that fact.
The author included some valid points in the article along with some "stretches".
The exceptions to the "old people rule", would be the Zukerburgs and Bezos and other young whippersnappers that have made it big before they hit 60 or 50 or whatever limit you want to use.
The rule is that most of the ruling elite, TPTB, etc. ARE the older folks that have inherited their wealth or clawed their way to the top 1%. No problem with that. Tax laws are written by, controlled by, etc. the rich, regardless of your age.
One of the bottom lines is that if young folks want to survive in this changing world, they either have to learn how to game the system and take full advantage of what the laws and regulations allow or they will have to buckle down and find a way to live independently, out of the crosshairs of the government, as best they can.
I don't think I have missed much, but I do know that no one should care more about you than you. One MUST make the tough choices and decisions and the necessary sacrifices now, if he is to survive in the future (masculine pronoun "he" used to emphasize the age I learned grammer).
Indeed....
"......buckle down and find a way to live independently...."
Wise Words for all Men.....
Indeed....
"......buckle down and find a way to live independently...."
Wise Words for all Men.....
You can all do something about this for the future. Do not give you children a SSN. They will be exempt from federal law, statutes, acts and the whole deal. Without 'citizens' (employees), the government has nothing. They took your money, so why not take theirs?
The issue here is NOT about Young or Old....
Rather it is about Human Nature.....
Many People want Something for Nothing, or Too Much for Too Little.......
This Nature is easily Played Upon and Manipulated......
Who is more Guilty: The Politician who SALES or the Constituent who BUYS ?
Myself, I believe in CAVEAT EMPTOR.
Thus INDIVIDUAL RESPONSIBILITY.
MEDICARE and OBAMACARE should be and eventually WILL be, Completely Repealed.
Once that occurs, there will be a VAST SURPLUS in the Medical Profession.....
The "Invisible Hand" will then work its Magic:
PRICES and COSTS will Plummet.
As for SOCIAL SECURITY:
MEANS TESTING;
Remove FICA Income Cap;
Give ALL Citizens the IRREVOCABLE RIGHT and OBLIGATION to OPT IN or OPT Out at Age 18 Going Forward; and
RAISE THE RETIREMENT AGE.
You See, there are Solutions.
Unfortunately, they won't be Readily Embraced.
Human Nature as described above, is "Why".
The inevitable Financial Reckoning will bring them about.
AFTER that, and only AFTER that, Will the True Bull Market begin....
Most of the CURRENT RENTIERS won't be Participating; but rather a Whole New Younger Crop, as is the very Nature of our System.
fuck baby boomers
~dipshitMIDDLEclasswhiteKID