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Baby Boomers: Generation Spend, Generation Debt, Generation Second-Home; Tony Abbott must fight the baby boomer debt explosion
Topic Started: 2 Dec 2013, 07:34 AM (1,726 Views)
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Tony Abbott must fight the baby boomers' debt explosion

December 2, 2013
Paul Sheehan

Sweeping judgments about generations are dubious but the statistics do tell a story about one generation which stands out for all the money it has spent and all the debt it has racked up - the baby boomers. I am a member of that generation and I'm not happy about the boomers cost-shifting to generations X, Y and Z. Never before in peacetime have we seen one generation spend so much. Generation Spend. Generation Debt. Generation Second-Home.

Australia's first boomer prime minister was Kevin Rudd, and what a spendthrift he turned out to be. Yes, he ''saved Australia from recession'' during the global financial crisis, but in the process he wildly overreacted. Hansard is full of accurate warnings at the time. Rudd inherited zero debt and a budget surplus but his legacy is a $300 billion debt and a mountain of unfunded legislative commitments.

Peter Costello, the boomer treasurer who left behind zero debt, is now free to engage in frankness. He wrote recently about the challenge facing the Abbott government: ''I doubt we'll ever get back to where we were in 2006. I doubt the Commonwealth will ever pay off this debt.''

The collective record of the baby boomers in the wealthy economies is alarming. Boomers, those born between 1946 and 1964, who are thus aged from 49 to 67, have been running the world for a decade. In that time, the European Union has collectively accumulated a public debt of more than 90 per cent of gross domestic product. Japan has a public debt of more than 200 per cent GDP. The US has seen the growth of absurd disparities in wealth, a hollowing out of the middle class, an economy floating on massive money-printing and a federal debt now more than 100 per cent of GDP.

This is the defining challenge facing the Abbott government, yet only a small fraction of the political reporting is even looking at the challenge. Instead there is a din about spending, with a clamour about more, more more. Where is the money for Gonski? For the National Disability Insurance Scheme? For the infrastructure to deal with 240,000 immigrants a year? For cutting carbon emissions? For health? Indigenous disadvantage? Asylum seekers?

The one question rarely asked is the one that really matters: where is the money going to come from?

Reality: Australia cannot afford the Gonski spend, plus the NDIS spend, plus the carbon reduction spend, plus the paid parental leave spend, plus the infrastructure surge, plus the promised increase in defence spending, plus the cost of unfunded retiring boomers, plus reducing indigenous disadvantage, plus $1 billion a year for asylum seekers. The revenue is simply not there. It is never going to be there under the present mix of existing tax arrangements, budget commitments, social welfare obligations, low productivity growth, ageing population and the debt-service burden. Yet the critique is all about spin and social equity.

It is the moral obligation of the Abbott government to avoid what boomer governments have done all over the developed world, and avoid becoming a Me Generation of unsustainable social spenders.

Read more: http://www.smh.com.au/comment/tony-abbott-must-fight-the-baby-boomers-debt-explosion-20131201-2yjlm.html
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Steve99
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People of any era are funneled into whatever lifestyle/investing/career things are happening at the time. The current situation is the result of poor political and economic thinking, the bit players, ie the people are just that, puppets to whoever is pulling the strings (the majority anyway). The other issue is that if people don't follow the dogma/fashion of the times then there are various built in punishments, ie you will not have enough to retire on if you save cash and don't gamble on property and shares due to the deliberate and built in mechanisms for inflation etc. The policies that the so called baby boomers are operating under were set well before we were even of voting age by people who were born 80 -100 years ago. This cannot be blamed on a generation thing. To top this off, only maybe 20% of a so called generation fit the exaggerated profile that is accepted as common knowledge
As an aside to this, myself and other friends in the same age group mostly still have mortgages, no other debt, no investment properties and pretty poor superannuation savings, why? because of outside factors such as lost jobs/careers, illness and assorted other factors that killed savings.
Today's voting demographic is ruled by GenX and Y combined being the largest voting block by far. And what do we see? populist voting habits and no collective view of how things should really be so things will not change. The UK has found this out in a big way now that they have voted in the Tory
Gen X government who is doing exactly the same as the last Labour govt and the Tory govt before that, and that is, cow-towing to bankers, chasing up bubbles, encouraging perma-debt, off-shoring workers and importing cheap labour. I doubt that things will change no matter which generation is in charge.
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Ex BP Golly
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Hessian sacks and short air journeys for the lot of them says I.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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peter fraser
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Our problem is not enough government debt, and as a result the debt has been accumulated as private debt.

The worst thing that our government could do now is try to run a series of budget surplus's.
Any expressed market opinion is my own and is not to be taken as financial advice
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themoops
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peter fraser
2 Dec 2013, 09:46 AM
Our problem is not enough government debt, and as a result the debt has been accumulated as private debt.

The worst thing that our government could do now is try to run a series of budget surplus's.
If reddit and MB is any indication of gen x & y, they want to spend like hell too.

stinkbug omosessuale


Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments.
Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck!
See here
Property will be 50-70% off by 2016.
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Logic
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peter fraser
2 Dec 2013, 09:46 AM
Our problem is not enough government debt, and as a result the debt has been accumulated as private debt.

The worst thing that our government could do now is try to run a series of budget surplus's.
Peter, you sold 1000's that private debt. Do you take any responsibility at all?
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peter fraser
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Logic
2 Dec 2013, 10:59 AM
Peter, you sold 1000's that private debt. Do you take any responsibility at all?
If I do will I get to keep the assets that they bought - the houses, apartments, the warehouses, factories, business's, investments in shares, the cash held in accounts, all of it?

That would be a wonderful trade Paul.

You read here often enough Paul. You have had a chance to learn and understand the monetary system and yet you haven't bothered - why is that Paul?
Any expressed market opinion is my own and is not to be taken as financial advice
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Ageing boomers point the way for 2014

December 4, 2013
Richard Hemming

Three of Australia's top small cap fund managers met this writer recently to discuss the big themes hitting little companies. We did this last year and had tremendous success picking up trends that continued through 2013 - these included the hunt for income, the rise and rise of cyclical stocks, the stimulus rally and a falling Australian dollar versus the greenback.

This time we spoke to Australian Ethical Investment's Andy Gracey, Celeste Funds Management's Frank Villante, Cadence Capital's Karl Siegling and Invesco's Cynthia Jenkins.

Theme 1 The wealth effect Money printing in its various forms has inflated asset prices and helped people feel happier about their economic circumstances, so they are spending. This benefits property developers and wealth managers.

The fund managers disagree on whether this will benefit the economy as a whole via the Keynesian multiplier effect. Some, including Cynthia Jenkins, see that there could be an end to companies solely relying on cost-reducing to increase profits; while others, such as Frank Villante, don't believe this will occur.

Theme 2 High price earnings multiples will continue A corollary of this is that, all things being equal, the market should continue to rise. ''In a low interest rate environment, assets can do nothing but go up. That is a rule of asset pricing,'' says Karl Siegling. The market PE has increased from about 13 times last year to 14.5 times.

All agree that it should at least stay high, and may well go up.

Theme 3 An ageing population Baby boomers are genuinely starting to put their feet up, buy investment properties, get more diseases, lose some of their eyesight, and draw on government assistance.

Andy Gracey has a big weighting in his fund to healthcare and medical science, but he also realises that it is not the easiest industry as an investor to get a return from: ''The services (for aged care) have to be cost effective. With pathology, for example, the government has been effective in clawing back some of the increased volume.''

Read more: http://www.smh.com.au/money/investing/ageing-boomers-point-the-way-for-2014-20131203-2yna6.html
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