28-Feb-11 News - Peripheral stock markets continue to plunge

Discussion of Web Log and Analysis topics from the Generational Dynamics web site.
jdcpapa
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Joined: Sat Aug 08, 2009 7:38 pm

Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by jdcpapa »

Frank Baynes wrote:
Sure, and by the way, I am not accusing you personally, but I am just citing the fact. There are many financially responsible baby boomers, but I am looking at this from a generational point of view. As you can easily see below (or frankly if you look at numbers anywhere else), the financially responsible (i.e. with their wallet and their vote responsible) baby boomers have not been the norm.

I am a baby boomer, too. I am born in 1951 and have been watching this nightmare accumulate wide-awake since the 1980s. I have been saying what I am saying now for decades, and still nobody wants to hear it. It is our generation that has it upside down, and we ill pay for it ourselves, along with all other generations. Our generation's day of reckoning is coming and it will not go according to plan, i.e. that it will be our children's and grandchildren's problem. It will shortly be our own problem and it will manifest itself in a sudden fall in our own generation's standard of living, precipitated by the fact that we will have close to no retirement income. Certainly not from the government, but most likely not from private retirement money sources either.

As a reader of the Generational Dynamics blog, you will easily see what I mean.

Alright, enough theory, now some numbers:

For illustration purposes, Baby Boomers = born between 1945 and 1960, start playing a significant role in consumption and society around 1970 and start phasing out around 2010. The following numbers are in 2010 dollars, i.e. AFTER taking inflation into account:

Federal debt per citizen (excluding off-balance sheet debt, i.e. excluding unfunded liabilities) in 2010 dollars:
1970 $10,610
2010 $46,994
An increase of public REAL indebtedness by more than 450%.
Also, note that before 1970 peace-time deficits were very rare. Since 1970, there have been only about 4 balanced budgets, all during the internet boom.

Credit market household debt per citizen in 2010 dollars:
1970 $12,262
2010 $43,925
An increase of private REAL indebtedness by about 360%.

Numbers are from the St Louis Fed, Census, and the Fed Board.

I have not even included unfunded liabilities because they are completely off the charts. The benefits that we gave to ourselves without coming up with the funding. But let's leave that out, it is bad enough with just the comprehensible part of the numbers.

Who benefited from that? Who spend more than he/she was earning? Who will pay that back?

Mathematically, it could never work, but the ride was fun. However, everybody else will pay, and us, too. What we got from our parents was a solid foundation and a quite healthy financial situation. What we leave to our children is pure disaster. Shame on us. And even now we don't want to change our ways. We want our self-approved ponzi packages, and do not care about any other generation and how they can possibly finance this, even more so after we leave them with so much debt already. Debt that was created by the part of our consumption that we actually did not pay for and put on the "credit card".

For a quick read, I refer you to these charts: http://www.scribd.com/doc/45835558/Econ ... April-2010.

So from a generational point of view:

- post-war generation (our parents): saved more than they consumed, left us savings and low level of indebtedness
- baby boomers (us, the ponzi generation): consumed more than we saved, ran indebtedness up fourfold (not counting "entitlements")!
- generation x and thereafter: forced to save more than they consume, left wondering why they cannot have the same standard of living as their parents, must pay parents debt back and muddle through the prolonged economic crisis created by their parents with their big spending ways

I know it's hard to accept, but the facts are the facts. That's why I say, "The baby boomers have in effect used their parents, their own, and their children's resources."

I do not take your broad -brush stroke indictment of the "baby boomers" personally. I point out that your assertion (including your support)that "baby boomers" are the cause of the crisis is false. I base my opinion on the fact that I do not fit your profile and you further support my opinion when you state: "There are many financially responsible baby boomers....". Further, your supported data only provides a probable cause not the likely source of the crisis.

That being said, I believe that there are elements of the population that have contributed significantly to this situation. But, I cannot point my finger at any one generation. I believe that this problem stretches across class and generations. It is greed and ignorance personified. My beloved Country has become an entitlement society created in part through denial, lack of self-respect and fiscal irresponsibility. There is no accountability.

Yes, our standard of living is declining and will continue to decline until we hit bottom. Along the way the elected officials will continue the same pattern. We are now more aware of their conduct because as "baby boomers" we are beginning to realize that we are going to suffer the most, especially those of us that fit your indictment. Because whatever percentage of "baby boomers" are ill prepared (of the 80 million strong)-there is no money to carry them. I have no plan as an American, after a life of fiscal responsibility, patriotism and depression era mentality, either to receive SS (I have never dipped into the public trough) or to dig into my pocket to support those of us who displayed your indicted characteristics.

Frank Baynes

Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by Frank Baynes »

jdcpapa,

It sounds like we have a lot in common. I appreciate your response and have lived my life with the same attitude.

Where we disagree is that I do see the self-indulgence of the baby boomer generation and the "live above your means" mentality that characterizes our generation are, in fact, the cause of our crisis. It is a debt crisis after all, as (I hope) everybody can see by now.

Let me put my argument a different way:

Had the majority of our generation lived like you and me, i.e. produce/earn more than consume/spend, would we be in today's precarious situation? The answer is simply no.

As I pointed out in earlier post, debt is the byproduct of spending more than you earn. That's what happened, on a large scale, done by a generation that was bigger in numbers than any other. It could have turned out the other way: had baby boomers lived their lives with a post-depression-like attitude (i.e. work, earn, spend some, save some), there would be no debt crisis now. Our children would find the same opportunities that we found thanks to the financial prudence of our parents. But our children don't and won't for a very long time.

I guess, it is all part of the generational cycle, and that's how our generation has bankrupted America. Sorry to be so blunt.

jdcpapa
Posts: 190
Joined: Sat Aug 08, 2009 7:38 pm

Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by jdcpapa »

Frank Baynes wrote:jdcpapa,

It sounds like we have a lot in common. I appreciate your response and have lived my life with the same attitude.

Where we disagree is that I do see the self-indulgence of the baby boomer generation and the "live above your means" mentality that characterizes our generation are, in fact, the cause of our crisis. It is a debt crisis after all, as (I hope) everybody can see by now.

Let me put my argument a different way:

Had the majority of our generation lived like you and me, i.e. produce/earn more than consume/spend, would we be in today's precarious situation? The answer is simply no.

As I pointed out in earlier post, debt is the byproduct of spending more than you earn. That's what happened, on a large scale, done by a generation that was bigger in numbers than any other. It could have turned out the other way: had baby boomers lived their lives with a post-depression-like attitude (i.e. work, earn, spend some, save some), there would be no debt crisis now. Our children would find the same opportunities that we found thanks to the financial prudence of our parents. But our children don't and won't for a very long time.

I guess, it is all part of the generational cycle, and that's how our generation has bankrupted America. Sorry to be so blunt.
Frank,

I see the self-indulgence and "live above your means" mentality (which in my view are synonymous) of the baby boomers along with the other generations. I also see that toxic debt is an elemental cause of the crisis. Debt is not a by-product of spending more than you earn. Debt is a result of borrowing money to fund your lifestyle. It becomes toxic when you cannot keep your promise to pay it back.

The baby boomers started to hit the ground running in the early 90's to coincide with the rise in the stock market. The baby boomers need to keep it going because now their financial security is on the line and in that sense they are part of the problem. The baby boomers used smoke and mirrors to sell the Wall Street mirage and now it is coming back to bite them. They have been selling a "bill of goods". They are in denial. On an on and on............

I concentrate on "ground zero" these days because after all is said and done: that is where the "rubber meets the road". Respectfully.

John
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Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by John »

The financial crisis was possible only because of the unique features
of both the Boomer Generation (Prophet archetype) and Generation-X
(Nomad archetype).

The synthetic securities were created by Gen-Xers who graduated in the
1990s with masters degrees from "financial engineering" programs.
There may have been some generational crossover, but basically the
bulk of the financial crisis was based on Gen-X "financial engineers"
colluding with their Boomer bosses to create fraudulent synthetic
securities. http://en.wikipedia.org/wiki/Financial_engineering

If it were just up to the Boomers, then it wouldn't have happened,
since hardly any Boomer could create a residential mortgage backed
collateralized debt obligation if his life depended on it.

If it were just up to the Gen-Xers, then it wouldn't have happened,
because an ethical Boomer generation would have stopped their Gen-Xer
employees from committing fraud.

Unless you understand the generational dynamics of the situation, and
the relationship between the Gen-X "financial engineers" and their
Boomer bosses, then you'll never understand what caused the financial
crisis.

And incidentally, it doesn't just depend on the particular securities
of our time. This kind of thing has happened repeatedly throughout
history, through collusion between the Prophet and Nomad generations,
using whatever techniques were available at the time. For example, in
Tulipomania, you could obtain a certificate that entitled you to a
particular tulip bulb the following spring.

** The bubble that broke the world
** http://www.generationaldynamics.com/cgi ... rett071009


He's a list of just a few of the many, many articles where I've
written on relationship between Boomers and Gen-Xers over the years:

** Stories of massive generational fraud and corruption continue to pour out
** http://www.generationaldynamics.com/cgi ... 14#e090414



** The 'culture of complicity' continues with Tim Geithner's new toxic asset plan
** http://www.generationaldynamics.com/cgi ... 26#e090326



** BlogWatch: Yves Smith at 'Naked Capitalism' adopts generational model of financial crisis
** http://www.generationaldynamics.com/cgi ... b#e090607b



** A generational view of China's growing melamine food disaster
** http://www.generationaldynamics.com/cgi ... 17#e081117



** Brilliant Nobel Prize winners in Economics blame credit bubble on 'the news'
** http://www.generationaldynamics.com/cgi ... b#e080427b



** Software development projects for Moody's, Digimarc, Y2K, DEC further illuminate Gen-X nihilism
** http://www.generationaldynamics.com/cgi ... b#e080523b



** Reader comments on the Nihilism of Generation-X
** http://www.generationaldynamics.com/cgi ... 29#e080129



** The nihilism and self-destructiveness of Generation X
** http://www.generationaldynamics.com/cgi ... c#e080121c



** Subprime mortgage executive kills wife and jumps off bridge to his death
** http://www.generationaldynamics.com/cgi ... b#e080121b



** Markets fall as investors are increasingly unsettled by bad economic news
** http://www.generationaldynamics.com/cgi ... 21#e071121



** Bond insurer 'bailout' appears near crisis point
** http://www.generationaldynamics.com/cgi ... 08#e080208



John

Frank Baynes

Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by Frank Baynes »

This is a great discussion and I am happy to participate.

jdcpapa,

Again, we agree on most but you leave me puzzled when you say:
jdcpapa wrote:Debt is not a by-product of spending more than you earn.
What else is it? You say:
jdcpapa wrote:Debt is a result of borrowing money to fund your lifestyle.
Well yes, exactly. More precisely, only the part of the lifestyle that is not financed by earnings. Or in other words, when someone spends more than he earns.


John,

I love your blog, but I have noticed, over the years, your sometimes seemingly rosy and apologetic description of the Baby Boomers and a vilifying tone when you talk about Generation Xers. That's why I initially responded.

But you got me intrigued when you said:
John wrote:If it were just up to the Gen-Xers, then it wouldn't have happened, because an ethical Boomer generation would have stopped their Gen-Xer employees from committing fraud.
So you are saying the Baby Boomers are an unethical generation, allowing (as their bosses) the Generation Xers to go ahead and commit fraud.

Instead, of calling the baby boomers outright unethical, I would characterize our generation more as self-indulgent with a sense of entitlement. And then the cause (i.e. self-indulgence) justifies the means (any, I guess). Baby boomers seem to think they have the right to take the resources of the generation before and after them, just as happened with the roaring twenties generation.

It is true, the Generation Xers have maybe contributed to the prolongation of creation period the debt mountain (or, "debt heap", as I like to call it), mainly with their ruthless move towards complexification (which makes it much easier to lie to others and to oneself).

But when you say:
John wrote:If it were just up to the Boomers, then it wouldn't have happened, since hardly any Boomer could create a residential mortgage backed collateralized debt obligation if his life depended on it.
I do not think that this is a valid hypothesis, as many engineers behind these products were/are baby boomers. Actually, many, if not most, of the engineers behind this giant ponzi fraud that we are still witnessing are baby boomers.

Examples:
Joseph Cassano of AIG
Ira Wagner of Bear Sterns

Just to name a few.

And yes, I could not agree more, when you say:
John wrote:And incidentally, it doesn't just depend on the particular securities of our time.
Yes, for example, CDOs existed in the 1920s, they just carried other names.

But I would like to point to the following:

Are the Generation Xers with their flaws largely a product of the tone that we set, when we were dominant. I just want to say:
Gordon Gekko, Wall Street wrote:Greed is good.
John, as an expert, what went wrong in the handover between post-war generation and the baby boomers?

Also, I suggest the following read:
http://ilene.typepad.com/ourfavorites/2 ... kind-.html

jdcpapa
Posts: 190
Joined: Sat Aug 08, 2009 7:38 pm

Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by jdcpapa »

Frank Baynes wrote:This is a great discussion and I am happy to participate.

jdcpapa,

Again, we agree on most but you leave me puzzled when you say:
jdcpapa wrote:Debt is not a by-product of spending more than you earn.
What else is it? You say:
jdcpapa wrote:Debt is a result of borrowing money to fund your lifestyle.
Well yes, exactly. More precisely, only the part of the lifestyle that is not financed by earnings. Or in other words, when someone spends more than he earns.
The Lending institution is the manufacturer. Debt is the product. Toxic debt (toxic asset on the books of the lender) is the by-product. Toxic debt is the result of "self indulgence" and spending more than they earn by those bad, bad, baby boomers!

Frank, you indict the baby boomers on a charge of gross negligence. I prefer to look at it this way: The greatest generation populated this Country with baby boomers. Baby boomers were at peak 3 times (I guess) the size of the greatest generation. The greatest generation essentially produced a source of funds (those “self indulgent” baby boomers) for the government. The “by-product” to the greatest generation was the guarantee of financial security. The joke is on us.

I dusted off my sociology book and found the following definition of the “Relativity of Truth”:

“Whenever human action is concerned, all truth is relative.”

John
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Location: Cambridge, MA USA
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Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by John »

Dear Frank,
Frank Baynes wrote: > I do not think that this is a valid hypothesis, as many engineers
> behind these products were/are baby boomers. Actually, many, if
> not most, of the engineers behind this giant ponzi fraud that we
> are still witnessing are baby boomers.

> Examples:
> Joseph Cassano of AIG
> Ira Wagner of Bear Stearns
That's not true. Both of these people are managers, not engineers. I
know from personal experience as a software engineer that engineering
managers don't know shit about how to do the technical stuff that
their employees are doing.

Furthermore, both of these people are on the Boomer/Gen-X cusp, which
could well mean that they have the same hatred and contempt for
Boomers that younger people have.
Frank Baynes wrote: > Are the Generation Xers with their flaws largely a product of the
> tone that we set, when we were dominant.
Gen-Xers have lived in the shadow of Boomers their whole lives. Their
hatred of Boomers was well documented by Strauss and Howe. If this
subject interests you, then you should read their book, "Generations."

Also, you should read some of the articles I previously linked to.
Start with this one:

** Reader comments on the Nihilism of Generation-X
** http://www.generationaldynamics.com/cgi ... 29#e080129


Here's another one you should read:

** Barack Obama to Boomers: Drop dead!
** http://www.generationaldynamics.com/cgi ... 23#e070123



John

Frank Baynes

Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by Frank Baynes »

John,

I see your point, although I confess I am having trouble with the generalizations.

I have read (in some cases re-read) the articles cited in your previous response. Thank you!

As I said previously, I think your blog is great and I am a grateful and regular reader.

The big question for me remains: How will this play and what does it mean for America? Are we condemned with no way out? Worse, will we fight the inevitable and become the villains of the 21st century, like the Germans became for the 20th century? The parallels are already astounding and, above all, shocking?

How can we positively influence the path of history before it is too late?

Frank

John
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Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by John »

Frank Baynes wrote:How can we positively influence the path of history before it is too late?
Too late for what? It's already too late to prevent a financial collapse and world war.

It's not too late for you to prepare yourself and your family as well as you
can to survive.

John

Frank Baynes

Re: 28-Feb-11 News - Peripheral stock markets continue to pl

Post by Frank Baynes »

John wrote: Too late for what? It's already too late to prevent a financial collapse and world war.
John, I take what you are saying very seriously.

You say world war is inevitable. But what form will a world war take in our age, with so many nuclear powers? Wouldn't it more likely be a world trade war or some other kind of conflict? What is different in our age is that the deterrents are such that conventional warfare would equal quasi-automatic self-annihilation, thereby defeating the purpose of war itself.

What type of war/conflict do you see? I have read you "clash of civilizations" references, but am not sure what you mean? I do not think that Egyptian and American facebook users will wage war against each other. Or will they?

So what kind of conflict will it be?
John wrote: It's not too late for you to prepare yourself and your family as well as you can to survive.
And what to do in order to prepare? I see people talk about stocking up food, weapons, and ammunition, and buying gold and silver. I don't see how these thinks will be very helpful if in the case of a war or breakdown.

Or do I have this wrong?

Any comments and suggestions would be greatly appreciated. I very much appreciate your perspective and insights.

Frank

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