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Thread: For all you family raisers-

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    Senior Member USIC1's Avatar
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    Default For all you family raisers-

    Class of ‘09: You’re Screwed
    By Bill Bonner

    05/29/09 London, England Last weekend, we journeyed to Boston to attend a college graduation. Thousands of callow scholars were on display. Each was handed his papers…and then marched out of the hockey stadium. To the tune of ‘Pomp & Circumstance,’ wearing a long, red robe, he entered the outside world solemnly…like a patsy joining a poker game.

    So far, not a single major university has asked us to make the commencement address. Nor a minor college. Not even a school of cosmetology or taxidermy. But here at the Daily Reckoning headquarters in London, protected by a broad ocean and a narrow reading of the First Amendment, we will give them – and UK graduates too – advice no one asked for.

    “Plastics,” was the advice given to college graduates in Mike Nichols’ ’67 film. But that was when there was still hope for America’s manufacturing sector. Even then, it was too late. The percentage of GDP from the manufacturing sector fell for the next four decades, from over 20% in the last ’60s to barely 12% last year. Better advice would have been ‘derivatives.’ They stank just as bad, but they were much more profitable. While only 8% of GDP, finance accounted for 40% of corporate profits in 2007. And derivatives grew from nothing to a face value of 16 times the GDP of the entire planet.

    But your elders are always giving you bum advice.

    “You cannot decline the burdens of empire and still expect to share its honors,” said Pericles to the class of 430BC. He lived during a time not unlike your parents’ era in the USA – when Athens was on top of the world. But vanity got the better of him. He launched an attack on Sparta that backfired badly. He soon died of plague and Athens was not only ruined, but enslaved. Athens’ ‘golden age’ turned to lead. Young Athenians should have shrugged off the burden rather than accept it. You should do the same.

    When you were born 20-some years ago, the nation’s total debt per person was less than $90,000 – adjusted to ’09 dollars, of course. While that was a lot of money, it was nothing compared to what was coming. Now it’s $186,717 per person – more than twice as much, in real terms. Fortunately, private debt is not inheritable. But it comes to you as a lien against property. Instead of paying off their mortgages and leaving you a house, free and clear, the baby boomer generation spent the ‘equity’ in their houses even faster than they got it. House prices rose. But mortgage debt rose faster. While your grandparents owned 80% of their houses, by 2007, the typical homeowner only really owned 4 rooms of an 8-room house. And then, when house prices fell, so did his remaining equity…to the point where one out of six homeowners in America is now underwater. You could still eventually inherit a house, but you may have to scrape the barnacles off the front porch.

    But that’s not even the half of it. While your parents had control of the US government they allowed themselves a little larceny. Add the unfunded retirement and healthcare benefits they voted for themselves to the official national debt, and together they are scheduled to cost your generation 4 times the total annual output of the US. This is over and above the private debt they accumulated.

    Some of this debt can be carried. Some will have to paid down. But as it stands, as much as $77 trillion of post-’09 earnings must be stolen from the future in order to pay for the liquor your parents drank…the bombs they dropped on god-forsaken foreigners…and the interest on their debts. So, forget about saving for a European vacation or a house of your own. Even if every penny of your savings – and every other American’s savings – are put to the task you will still be paying for your parents’ expenses all your life.

    But wait, there’s more! The burden is getting heavier. Federal budget projections show an additional $7 trillion in deficits over the next 10 years. Described as the cost of fighting recession, the present generation buries its own mistakes under cash that the next generation hasn’t even earned yet. Today’s bankers, businessmen and speculators are being bankrolled by you – tomorrow’s bankers, businessmen and speculators. Today’s homeowners get a helping hand…from whom? Tomorrow’s homeowners – you. Today’s employees get a boost too. Same story. Where do you think the money came from to pay Wall Street bonuses this year? How do you think GM stays in business…and Fannie Mae…and AIG… Who pays those salaries? Who pays to keep troops all over the world and keep old people supplied with new drugs? Who pays for hundreds of billions’ worth of ‘shovel ready’ boondoggles? You will. At least, that’s the plan.

    The luck of one generation is the curse of the next. Like Pericles, your parents inherited a dollar; they leave you a peso. They took over the strongest, richest, most competitive nation in the world. And like Pericles they minded everyone’s business but their own. Now, not only does the US owe money all over town, its government puts out trillions more in IOUs every year – each one with your name on it. You’re not even out in the real world yet, and you’re getting the bill for 50 cents of every dollar the feds spend – almost none of it earmarked for you. But that is the thing about the real world your teachers probably forgot to tell you about. It is more unreal and fantastical than anything you studied.

    Here’s what’s real: You’ve been dealt a bad hand. From the bottom of the deck…your parents have slipped you some nasty cards. Our advice? Fold ’em. Get up from the table before they clean you out.

    Enjoy your weekend,

    Bill Bonner
    The Daily Reckoning


    Such a bright future to look forward to... A broken economic system on auto pilot...


    Lovely, just lovely, eeehhh???

    opcornsmile:

  2. #2
    Senior Member underground quester's Avatar
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    Default Re: For all you family raisers-

    As an outsider looking in allow me to make one comment here.

    So goes the U.S. ...so goes the rest of the world... as we have clearly seen with the events of last year and this year.

    Canadians... and the world for that matter are holding their collective breaths that Obama and his team can steer a course through this mess.

    The G20 leaders have made it very clear to BUSH and will make it very clear to Obama there has to be SUBSTANTIALLY more regulation in the banking and financial sectors. These people cannot be allowed free reign or the world will continue to see more problems like this. They cannot be above the law nor above regulation.

    Anyway, Steve has built a special website somewhere for political stuff... and that is the place for this I would guess, so I will end here.
    Success is a journey, not a destination...

  3. #3
    Senior Member Dave72's Avatar
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    Default Re: For all you family raisers-

    Another outsider opinion, I suppose..

    I think the US is in a downward click .. not a spiral. There's gonna be less for the most ppl. Not along the lines of some Ethiopia etc, but the number of ppl dieing from malnutrition and the number of people living in slum-like conditions will increase over the next 20 yrs. Crime will go up, hard to tell the level of policing that will afford to balance it to some level. Gonna have more areas as 'no go' zones. Will this be some workplace hazard for us ? (Id assume there's areas like this in LA, Atlanta, NYC etc already).

    I have 2 small boys, 2 and 6. I can only hope that the real-world intelligence and 'education' I am able to provide them will be enough to get them up high enough on the 'hump' to be among the % that are able to feed and shelter themselves in reasonable comfort. Its gonna be tough.

    I find some consolation wrt the whole China thing, when you think that the whole economic thing over there is also artificial. Theyve stomped all over their people, their environment, heavily subsidized fuel prices too allow growth, etc. It doesnt help that we're all out buying Made in China crap.
    (May you live in interesting times)

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