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UNSHURE

End Of The Forty Year Baby Boom Debt Binge?

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I saw a program on channel five a few weeks ago. It was about the 1970’s and, in particular, about the start of the modern ‘debt ridden consumer society’. It appears that, throughout the 70’s, attitudes changed. Debt ceased to have a social stigma attached to it. It became the accepted norm.

Many people started living beyond their means. They started to spend enormous amounts of money on cars; foreign holidays; fashion clothes; and, of course, home improvements. Advertising took off in a big way, persuading people to spend even more.

Since the baby boom generation was much larger than preceding generations, and since it was in its ‘young family stage’ in the 1960’s-1970, property prices began to take off. So we then saw the beginnings of this long protracted cycle of increasing debt and property prices which has been going on ever since. Even two sharp recessions with significant falls in House prices failed to break the cycle. The binge resumed as soon as the recessions ended.

However, the most striking point that the program put forward is that many people got into debt in the 70’s and have been in debt ever since. Thinking about this a little further, we are now reaching a climax. Not only have people been in debt since the 70’s but many of their children and grandchildren are also in debt. We have three generations of people to whom debt has become a way of life.

Recent levels of debt are unprecedented. Debt levels passed the £1 trillion mark some time ago. Bankruptcies are rising. As evidenced by the growing number of TV shows, on the subject, many people are running into such levels of debt, that they can barely pay the interest off on their loans. Students are entering the workforce with large debt burdens before they even begin working. People are still buying houses at ridiculous unsustainable prices.

A BBC article, last week reported that many people are going into retirement with a significant amount of mortgage debt. I know people myself who are approaching retirement, who are still in considerable debt, and still SPENDING LIKE MAD!

This is where things become unsustainable. Retirement causes incomes to fall. As baby boomers retire en-masse, they will not be able to sustain the consumer-debt binge. They will be hard pressed to sustain the payments of debt they have built up in the past.

Many people in the succeeding generations will not be able to fill the ‘spending void’. They will be forced to cut spending dramatically in order to pay off their debts. This is when the whole thing will go into reverse. The binge will be over and the hangover will begin.

The falling spending will lead to less demand which will lead to layoffs which will lead to falling spending and so on. It is likely to be a long hangover. Probably a decade at least.

I think that this next recession will be much worst than the last. It will probably be more like the depressions of the 1930’s or the recent depression that Japan is recovering from. House prices are likely to fall much further than many people are expecting over a much longer period.

I don’t think that this reversal has started yet. The current economic picture is very cloudy and confusing. The short term outlook is opaque. Markets are volatile. The whole picture seems to change on a daily basis. However the massive price rises of the last few years appear to have abated and debt levels are looking a lot more worrying. World interest rates are rising and the US economy looks very precarious.

I would expect to see a serious depression within the next five years.

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Yes, this was the "Barber Boom", he relaxed credit controls and massively expanded the money supply, great at the time but it all ended up in inflationary tears of course, as it always does

The Barber Boom (1972)

The Conservative chancellor during the Heath government, Anthony Barber, bears a considerable responsibility for the fundamental shift in British economic policy in the last few decades.

His unsuccessful "dash for growth" led to inflation, confrontation with the unions, and ultimately to the defeat of Edward Heath and his replacement by Mrs Thatcher.

Anthony Barber told Parliament in 1972 that his Budget would add 10% to the UK's growth in two years, and he professed to be unconcerned by his own forecast of a £3.4bn public sector borrowing requirement.

He reduced income taxes by £1bn, and gave further huge tax concessions to industry in order to save jobs.

Unfortunately, events soon proved him wrong. Inflation soared, boosted by the newly-floated pound and the first oil crisis.

Within 15 months the chancellor was forced to bring in a deflationary Budget, and the government was forced into an incomes policy (wages freeze) to try to control inflation which led to a confrontation with the miners.

The UK's economic performance continued to deteriorate during the 1970s, and the stock market and housing boom went into reverse.

The debacle convinced many critics, not least in the Conservative Party, that Keynesian measures which used government spending to boost the economy and cut unemployment, no longer worked.

:unsure:

Edited by BuyingBear

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I'm not sure I understand. Baby boomers in DEBT!!?? They're mostly loaded, with a number of btl houses, holiday homes and range rovers! Have you seen a boomer with an old car? And they don't get them on credit because their generation see that as a great evil.

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I'm not sure I understand. Baby boomers in DEBT!!??

We're talking about the 70's onwards, just look at the growth in broad money since Nixon closed the gold window. All that bad ass debt and wanton consumption has long been inflated away, they are now left with decent assets and pound signs in their eyes as they expect an entirely new generation of people to mortgage themselves up to their necks to their benefit. The problem is that our demographics are barrel shaped, so there will be an eventual over-supply, hence the reason why the boomers will have a political monopoly, they will use this monopoly to enforce other monopolies, such as on building new homes (destructive of their notional wealth), they already do.

All that hippie shit in the 1960's was just selfishness and hedonism at its core, and so it continues on till this day. A whole 'entitlement' generation that will get more out of the welfare state than they paid in, which means others will have to pay more in than they can expect to get out, whilst also supporting a burgeoning and contemporary underclass, they have to pick up the tab for countless legacy debts too.

The UK is really quite fcuked, no wonder we need young blood from Poland, shame we have to house them like Victorian peasants and quite a shame for native 'workers' who will have to accept a lower standard of living and deflationary pressure on their wages.

I've seen the future of unbalanced neoliberalism and I don't like it, which saddens me on a philosophical level, our markets aren't free, they never can be.

Edited by BuyingBear

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Wow, you're optimistic!

I am not trying to argue that we will have some kind of economic armeggedon. I'm shure we will get through any recession that comes our way.

I'm hopeful about the period following the depression (2020's). There will be a lot more challenges, but there will also be a lot more opportunities, for the Western Economies, in a world in which global economic power will be re-distributed more evenely. Perhaps we will then be able to discover a new reality about life expectations instead of 'doing it all with debt'.

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I am not trying to argue that we will have some kind of economic armeggedon. I'm shure we will get through any recession that comes our way.

The British housing boom has been built on economic nirvana. Everything has gone right for the British economy, inflation has been low, unemployment has been low, the £ has been strong, immigrants have come over here looking for work etc, tax receipts have been good, the population have seen their personal wealth soar.

I am happy to agree that this has been good news.

The trouble is that all of this good news is now fully priced into the housing market.

ie these perfect economic conditions have to prevail just for the housing market to stay level.

Sadly that won't happen.

The housing market doesn't stand a chance.

(I was being slightly ironic, I think the recession is going to hit us before 5 years is out...)

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The recession will hit us next Thursday at 14:36:32 GMT, and will last for 76,362,691,680 microseconds.

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Guest Charlie The Tramp
End Of The Forty Year Baby Boom Debt Binge

I thought it was nine years of the debt binge. Most of the people I knew in the 1970`s were very careful with their money and long term savers.

British household debt is now equal to the total amount owed by Africa, Asia and Latin America to international banks and through loans from other countries.

...

Shadow chancellor Oliver Letwin said: "It took 600 years of banking history for household debt to reach half a trillion pounds. Now, under seven years of Labour, this has doubled. What else can we expect from a government that persistently attacks pensions and has decimated the savings culture?"

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I'm not sure I understand. Baby boomers in DEBT!!?? They're mostly loaded, with a number of btl houses, holiday homes and range rovers! Have you seen a boomer with an old car? And they don't get them on credit because their generation see that as a great evil.

Firstly, the baby boomer generation are unlikely to see debt as a great evil. The generations that preceded the boomers would though. They had suffered hardship in the 1930's depression and then had to endure the second world war with rationing continuing for several years after. They would be unlikely to take on debt in order to buy luxuries.

Secondly

Not all baby boomers are loaded. Beware of sterio typing a whole generation.

Thirdly

For various reasons many baby boomers are going into retirement with significant debt around their necks.

http://news.bbc.co.uk/1/hi/business/4758759.stm

http://news.bbc.co.uk/1/hi/business/3648907.stm

http://www.cccs.co.uk/media/Article.aspx?ArtID=PR20040923

http://www.aginghipsters.com/blog/archives/000166.php

Many baby boomers lost good well paying jobs in their middle age. Not all people find it easy to retrain at such an age. Consequently, they went into low paid jobs or enforced early retirement.

It is only since WW2 that people have been living till a ripe old age. Consequently, a number of baby boomers had to retire early to look after ageing relatives.

A number of baby boomers lost their jobs and homes during the the 1990's house price crash.

Many baby boomers stopped saving in the mistake that rising house prices were the equivalent of saving.

http://www.cepr.net/publications/housing_bubble_2005_11.pdf

Furthermore, a number of baby boomers lost out in the .dom fall of 2000-2002.

Many baby boomers have lost out on their pensions due to the falling annuity rates. Annuities will give you a much lower income than ten years ago. Also, a number have lost out due to their firms going bust.

http://money.independent.co.uk/personal_fi...ticle343203.ece

http:/www.abc.net.au/worldtoday/stories/s693587.htm

Many baby boomers have worked in low paid jobs all their lives. Cosequently, they have not built up enough savings.

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The UK is really quite fcuked, no wonder we need young blood from Poland, shame we have to house them like Victorian peasants and quite a shame for native 'workers' who will have to accept a lower standard of living and deflationary pressure on their wages.

The current policy is undoubtedly to avert the demographic timebomb by increasing the level of immigration. Surely this is obvious to everyone in the country? There is a probably a freely available govt. document discussing the matter somewhere.

We are told by the govt that the projections are for large population growth. So where is the demographic timebomb? Essentially the UK has decided to take a pragmatic approach to this problem, which is being faced by all of the European economies. The choice is simple: surrender some of your existing culture and way of life in return for continuing wealth. A lot of countries aren't prepared to do this, but the UK doesn't have much culture to lose, so for most it is a win-win.

An example of the difference in mindset: go to any european country, and they tend to eat only their own cuisine - even the sophisticated end of their population has conservative tastes. Come to the UK, and the choice is bewildering. London is a true culinary melting pot, matched only perhaps by New York.

And if New York and the US have taught us anything, it is that embracing immigrants provides fuel for your economy (US's current financial problems aside....).

Sure, some people will suffer - mainly those at the bottom who have to compete with the new arrivals for work and housing. But the elites remain immune, separated by the glass wall that wealth provides.

America is still run by the old elites, the country club was a perfect refuge from the problems that mass immigration brought.

This is the future (and in reality, was probably the past for the UK as well).

Hell, it might just work.

Edited by Smell the Fear

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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