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How House Prices And Debts Are Building Ugly Tensions Between Parents And Their Children


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#76 campervanman

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Posted 09 September 2010 - 09:25 PM

You really don't understand.

YOU HAVEN'T PAID ANYTHING IN.

Every penny you paid in you were given back as tax cuts.

You have saved precisely.... zero.


Where is your evidence for this statement?
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#77 _w_

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Posted 09 September 2010 - 09:29 PM

Sorry, but I really don't see how I can be held responsible for what others of my generation have done.


Can there be no collective responsibility? That's the crux of the question I think.

And the problem is not party political as both right and left contributed to this problem of underfunding.




"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
–Frederic Bastiat



#78 Authoritarian

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Posted 09 September 2010 - 09:35 PM

Where is your evidence for this statement?



Errr, where do you think all their pension money is coming from? I'll give you a clue, the government didn't store it in individual safes waiting for boomers to turn 60.

#79 campervanman

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Posted 09 September 2010 - 09:42 PM

Errr, where do you think all their pension money is coming from? I'll give you a clue, the government didn't store it in individual safes waiting for boomers to turn 60.


Lets try some facts shall we:


http://spreadsheets....DZENVZ-tcLudwEw

please explain where the tax cuts that we benefitted from were.
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#80 Authoritarian

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Posted 09 September 2010 - 09:50 PM

Lets try some facts shall we:


http://spreadsheets....DZENVZ-tcLudwEw

please explain where the tax cuts that we benefitted from were.




I don't think you understand what Ruffles is saying. Public sector workers paid extra money into the pot at the time through their pension contributions, but this money was spent directly back on them via general state spending. To balance the books without the pension contributions government would've either had to raise general taxation or cut services, but they did neither. Instead they spent all the money and then pushed the pension bill out into the future.

The money isn't there, it's all been spent.

#81 dom

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Posted 09 September 2010 - 09:51 PM

you say 'didn't ask to be born' then you may not understand that.

I've got three kids and I don't remember any of them asking to be born. Having kids is incredibly selfish. So, as their father I deserve a medal for looking after them? -No!
Kids have a legitimate reason to be angered by their parents.

#82 _w_

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Posted 09 September 2010 - 09:54 PM

Public sector workers paid extra money into the pot at the time through their pension contributions, but this money was spent directly back on them via general state spending.


That's a pretty good description. Even those who don't want to understand should get it.




"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
–Frederic Bastiat



#83 _w_

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Posted 09 September 2010 - 10:13 PM

Here's an impressive rant on the subject from Nic Lenoir, courtesy of ZH:



From Nic Lenoir of ICAP
No Volume? Don't Shut The Algos Just Yet


I will send a macro update in a little bit. For now I would like to comment on the volumes or lack thereof... Today is just a dismal showing so far, and unless some bomb hits the news this afternoon this could well be the worst day on record. The attached chart is quite telling, and keep in mind that other than the short covering last week the past few weeks have already set record lows in volume for the year, so the comparison is quite telling! I understand it's a Jewish holiday but we are running at 1/3 of the volume of what would be already a very slow day!

Posted Image

A lot of noise has been circulating regarding high frequency and how the new market structure is detrimental to participation. Yes order front-running via flash trading and some bidding/offering patterns show that there are practices that are questionable to say the least, however I decided to pull out the chart of the volume or the Nikkei after the crash... That alone pretty much tells you LOWER VOLUMES HAVE NOTHING TO DO WITH MARKET STRUCTURE. The daily volumes traded on the Nikkei decreased 6-folds from 88/89 to 92 and that was without high frequency computers disturbing the market structure. So while I agree that there are definitely some problems with the current way our markets function in terms of mechanics, I think people are wildly missing the point. Besides, it's not like the market was not rigged before when brokers and sales traders would leak out selected information to their "favorite" customers. There will always be a race to informational advantage, and while it must be kept fair, the technological race is in a sense more fair than the old structure where the volume you traded commended the information you received... At least now the edge is obtained using your brain and not based on your size of your wallet. Order visibility is definitely making it difficult to move size easily, but I think part of it is also a need for participants to adapt.

Posted Image

The real reason why volume is so poor is that the market is fixed, I just don't know anyone who is a clever investor out there who thinks the market is fairly valued here and most buyers I talk to are motivated by the thought that the Fed will keep printing and debase the currency enough to make asset prices go up... talk about an optimist point of view: the only buyers are cynical! I was faced with an interesting challenge last night. My fiancee came home after starting a new job at a big firm asking me to help her decide on the allocation of her 401K. My first response was: I don't have a 401K (I do save, just not in a 401K), are they matching your contributions, if so only contribute up to the maximum they match. Having cleared that I looked at the options offered: company stock (ya right, you will get enough of that in bonuses and you are long just by working there), a handful of bond funds with just a vague description of the strategy/assets invested in, maybe a dozen equity funds... and that's it! Where is the "cash" box? Where is the "Gold" box? Ultra-short ETFs anyone? It became completely obvious that the 401K system is a perfect way to send savers to the slaughter house. It worked during the credit expansion of the last 40 years but now it's an awful proposition. Trying to come up with some sort of allocation in order to collect the matching program of my fiancee's employer was a lot trickier than it seemed and after tossing 33% into TIPS I really had to scratch my head to come up with the other two thirds. Other than a couple foreign equities funds that allow you to "escape" the government's and the Fed's policies partially you are pretty much stuck.

Laurence Kotlikoff has been talked about quite a bit after a couple op-eds in which he basically highlighted the fiscal gap and the absurdity of our current pension system. Volumes in stocks will not and should not pick up until we deal with it, it's time to wake smell the coffee and address a problem that everybody recognizes. People don't invest because they know the system is broken and they want nothing to do with it in its current state, as made obvious by the outflow out of equity funds. Sadly bond funds may not really save them when the bill comes due. Forget for a second that we have exported job overseas, automated manual labor, and doubled the workforce by including women (I am not talking negatively of any of these, just observing effect on labor supply) thereby devaluating labor, that this was only possible because we borrowed our growth and have now a broken world economy with producers with no demand and over-borrowed consumers who can't buy in countries that don't produce... We are still left with massive fiscal gaps. Again I bring up Japan where in the late 1990s they simply slashed pension payments. Americans are not as docile and with what is in practice a 2-year election cycle politicians are busy buying votes with money they don't have rather than tightening the government's belt. However cutting entitlements is exactly what's needed. Not for future retirees or people who start working now, absolutely not, for everybody now dead or alive (America is one of the rare countries where there are dead people collecting pension payments... this gives me very dark ideas). Retirees and people in their 40s and 50s vote, but they don't burn things up... young people do. Why is it that young people should pay the bill for a retirement system basically put in place by our great grand-parents and benefited for by our grand-parents and parents? On top of that people don't retire anymore because their pension savings don't cover their life style and so young graduates can't find jobs to pay for their parents retirements. With Illinois where pension payments are more senior than teachers' salaries in the debt structure cutting jobs, I wonder when people are going to get properly angry. I am already and it's not getting better. Voting turnout has actually gone up the past 10 years after a 30 year downtrend during which fat and happy baby boomers did not really bother showing up at the urns since both democrats and republicans were united in the demagogy of borrowing an illusory prosperity. People started voting a bit more, and it seems all they want is change, but change they are not getting. You want change? Well how about the truth for a change: we are bankrupt, your investments are in their totality worth 35 cents on the dollar including your house, you need to move in with your parents because we are slashing their pension payments and you can't afford a home. Now start from scratch! To me it sounds better than 4-day school weeks in Oregon where we are not educating the future generation so they can be even angrier and counter-productive revolutionary protesters when they grow up.

Good luck trading... from the short side!

Nic





"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
–Frederic Bastiat



#84 campervanman

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Posted 09 September 2010 - 10:26 PM

I don't think you understand what Ruffles is saying. Public sector workers paid extra money into the pot at the time through their pension contributions, but this money was spent directly back on them via general state spending. To balance the books without the pension contributions government would've either had to raise general taxation or cut services, but they did neither. Instead they spent all the money and then pushed the pension bill out into the future.

The money isn't there, it's all been spent.


For the sake of argument, lets assume what you claim is true. If so, how is that different for the boomer generation as opposed to any other generation in history?
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#85 _w_

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Posted 09 September 2010 - 10:42 PM

For the sake of argument, lets assume what you claim is true. If so, how is that different for the boomer generation as opposed to any other generation in history?


The current system is a pyramid scheme that didn't exist prior to WWII AFAIK.

As happens with every pyramid scheme, Only those at the bottom of the pyramid scheme stand to benefit while everybody else lose. Boomers are seen (wrongly IMO) as those at the bottom of the pyramid.




"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
–Frederic Bastiat



#86 campervanman

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Posted 09 September 2010 - 10:50 PM

The current system is a pyramid scheme that didn't exist prior to WWII AFAIK.

As happens with every pyramid scheme, Only those at the bottom of the pyramid scheme stand to benefit while everybody else lose. Boomers are seen (wrongly IMO) as those at the bottom of the pyramid.



The state pension system started in 1908. The first recipients had paid nothing in. They couldn't have because no scheme existed before they received their pensions. Therefore there was no fund, it was paid out of future taxation. In 1977 I bought my first house. I paid 20x the price the previous generation would have paid for it when they were my age. I paid higher taxes than they did, they had a property worth the same as mine that they paid a fraction of what i paid for mine. In other words, I was paying for their retirement through higher taxation and paying vastly more for the same house than they had. What is new?
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#87 _w_

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Posted 09 September 2010 - 11:04 PM

The state pension system started in 1908. The first recipients had paid nothing in. They couldn't have because no scheme existed before they received their pensions. Therefore there was no fund, it was paid out of future taxation.

Thanks for the info, I didn't realise the UK started it so early, I always though it came with Labour after WWII. So the pyramid started earlier, the only problem is that now we're bust and people are looking for someone to blame; the boomer generation is the most visible.

In 1977 I bought my first house. I paid 20x the price the previous generation would have paid for it when they were my age. I paid higher taxes than they did, they had a property worth the same as mine that they paid a fraction of what i paid for mine. In other words, I was paying for their retirement through higher taxation and paying vastly more for the same house than they had. What is new?


Good point, there's no arguing with that.




"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
–Frederic Bastiat



#88 RufflesTheGuineaPig

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Posted 10 September 2010 - 03:20 AM

The state pension system started in 1908. The first recipients had paid nothing in. They couldn't have because no scheme existed before they received their pensions. Therefore there was no fund, it was paid out of future taxation.


Fair comment, however 1908 is pre anti-biotics. and pre 2 world wars.

Not many got to claim and those that did didn't get to claim for long.

In reality it didn't mean much until post WW2 when a long period of international stability along with modern medicine massively increased life expectancy.
It's time to pay the piper. There is no magician who will magic away the debt. Someone is going to have to pay it. Bend over and prepare to make payment.

In this glorious nation of ours, if you work hard and keep your head down for 25 years then you too can aspire to own one-eighth of a one bedroom flat in Manchester.


My mum and day always tell me how important it is to save to buy a house. They should know, it took them nearly 6 months to save for theirs. As teenagers, they bought a 3 bed semi.

#89 expatowner

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Posted 10 September 2010 - 07:32 AM

My only issue with Boomers is with those who have piled into BTL thus fuelling the rise in house prices and ultimately stripping the younger generation of their 'wealth' (I use that term very loosely).

You mean like DrBubb?

#90 FaFa!

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Posted 10 September 2010 - 07:44 AM

I paid 20x the price the previous generation would have paid for it when they were my age. I paid higher taxes than they did, they had a property worth the same as mine that they paid a fraction of what i paid for mine. In other words, I was paying for their retirement through higher taxation and paying vastly more for the same house than they had. What is new?

Could you give us some stats?
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