MOST BOOMERS ARE UP SHIT’S CREEK WITHOUT A PADDLE

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Posted on 27th February 2013 by Administrator in Economy |Politics |Social Issues

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The average retirement balance of all workers is $77,000. The median is much lower, as the highly paid employees have large balances. This is pitiful enough, but looking at the balances for 55 to 64 year olds is frightening. The chart below captures a future of cat food and Oodles of Noodles for millions of Boomers. No wonder they will never vote to reduce entitlements. There really is no excuse for this pitiful level of savings at their age. A 60 year old was born in 1953. They turned 27 years old in 1980 at the outset of a 20 year bull market. Anyone who contributed regularly to a 401k from 1980 until today should have hundreds of thousands accumulated. Instead you have 60% of all 55 to 64 year olds with less than $72,000 of retirement savings.

These people have a life expectancy of 20 years and many will only get $15,000 to $20,000 per year from Social Security, with increases that will be less than the true inflation rate. Meanwhile, their real estate taxes, food costs, energy costs, and health care costs go up by 5% per year or more. They can earn about $600 of interest per year on a $120,000 retirement account balance. They can’t expect more than 3% real annual stock market gains over the next ten years, with a couple of plunges mixed in for good measure.

I hope Boomers weren’t counting on the idyllic retirement they see on those Wall Street banker commercials. The only ones having an idyllic retirement are the bankers.

 

MY CAT SEEMS TO LIKE IT. MAYBE BOOMERS WILL LIKE IT TOO

 

BOOMER MATH

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Posted on 13th December 2012 by Administrator in Economy |Politics |Social Issues

The chart within the article says it all. The older generations (Silent, Boomers, Xers) will all suck hundreds of billions more in benefits than they paid for. The bill will be passed to future generations. Math is hard. Honesty is harder. Reality is hardest.

Sponging boomers

The economic legacy left by the baby-boomers is leading to a battle between the generations

 

ANOTHER economic mess looms on the horizon—one with a great wrinkled visage. The struggle to digest the swollen generation of ageing baby-boomers threatens to strangle economic growth. As the nature and scale of the problem become clear, a showdown between the generations may be inevitable.

After the end of the second world war births surged across the rich world. Britain, Germany and Japan all enjoyed a baby boom, although it peaked in different years. America’s was most pronounced. By 1964 individuals born after the war accounted for 41% of the total population, forming a generation large enough to exert its own political and economic gravity.

These boomers have lived a charmed life, easily topping previous generations in income earned at every age. The sheer heft of the generation created a demographic dividend: a rise in labour supply, reinforced by a surge in the number of working women. Social change favoured it too. Households became smaller, populated with more earners and fewer children. And boomers enjoyed the distinction of being among the best-educated of American generations at a time when the return on education was soaring.

Yet these gains were one-offs. Retirements will reverse the earlier labour-force surge, and younger generations cannot benefit from more women working. There is room to raise educational levels, but it is harder and less lucrative to improve the lot of disadvantaged students than to establish a university degree as the norm for good ones, as was the case after the war. In short, boomer income growth relied on a number of one-off gains.

Young workers also cannot expect decades of rising asset prices like those that enriched the boomers. Zheng Liu and Mark Spiegel, economists at the Federal Reserve Bank of San Francisco, found in 2011 that movements in the price-earnings ratio of equities closely track changes in the ratio of middle-aged to old workers, meaning that the p/e ratio is likely to fall. Having lived through a spectacular bull market, boomers now sell off assets to finance retirement, putting pressure on equity prices and denying young workers an easy route to wealth. Boomers have weathered the economic crisis reasonably well. Thanks largely to the rapid recovery in stockmarkets, those aged between 53 and 58 saw a net decline in wealth of just 2.8% between 2006 and 2010.

More worrying is that this generation seems to be able to leverage its size into favourable policy. Governments slashed tax rates in the 1980s to revitalise lagging economies, just as boomers approached their prime earning years. The average federal tax rate for a median American household, including income and payroll taxes, dropped from more than 18% in 1981 to just over 11% in 2011. Yet sensible tax reforms left less revenue for the generous benefits boomers have continued to vote themselves, such as a prescription-drug benefit paired with inadequate premiums. Deficits exploded. Erick Eschker, an economist at Humboldt State University, reckons that each American born in 1945 can expect nearly $2.2m in lifetime net transfers from the state—more than any previous cohort.

 

 

Boomers’ sponging may well outstrip that of younger generations as well. A study by the International Monetary Fund in 2011 compared the tax bills of a cohort’s members over their lifetime with the value of the benefits that they are forecast to receive. The boomers are leaving a huge bill. Those aged 65 in 2010 may receive $333 billion more in benefits than they pay in taxes (see chart), an obligation 17 times larger than that likely to be left by those aged 25.

Sadly, arithmetic leaves but a few ways out of the mess. Faster growth would help. But the debt left by the boomers adds to the drag of slower labour-force growth. Carmen Reinhart and Kenneth Rogoff, two Harvard economists, estimate that public debt above 90% of GDP can reduce average growth rates by more than 1%. Meanwhile, the boomer era has seen falling levels of public investment in America. Annual spending on infrastructure as a share of GDP dropped from more than 3% in the early 1960s to roughly 1% in 2007.

Austerity is another option, but the consolidation needed would be large. The IMF estimates that fixing America’s fiscal imbalance would require a 35% cut in all transfer payments and a 35% rise in all taxes—too big a pill for a creaky political system to swallow. Fiscal imbalances rise with the share of population over 65 and with partisan gridlock, according to other research by Mr Eschker. This is troubling news for America, where the over-65 share of the voting-age population will rise from 17% now to 26% in 2030.

That leaves a third possibility: inflation. Post-war inflation helped shrink America’s debt as a share of GDP by 35 percentage points (see article). More inflation might prove salutary for other reasons as well. Mr Rogoff has suggested that a few years of 5% price rises could have helped households reduce their debts faster. Other economists, including two members of the Federal Reserve’s policymaking committee, now argue that with interest rates near zero, the Fed should tolerate a higher rate of inflation to speed up recovery.

The generational divide makes this plan a hard sell. Younger workers are typically debtors, who benefit from inflation reducing real interest rates. Older cohorts with large savings dislike it for the same reason. A recent paper by the Federal Reserve Bank of St Louis suggests that as a country ages, its tolerance for inflation falls. Its authors theorise that a central bank could use inflation to achieve some generational redistribution. Yet pressure on the Fed to cease its expansionary actions has been intense, and led by a Republican Party increasingly driven by boomer preferences.

The political power of the boomers is formidable. But sooner or later, it cannot escape the maths.

BOOMERS ARE GETTING OLD

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Posted on 25th November 2012 by Administrator in Economy |Politics |Social Issues

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At least Baby Boomers are consistent. They have been consistently delusional about their finances, use of debt to keep up with the Jones’, belief in home price increases funding their retirement, and reliance on the Federal government to provide for their old age. It seems they are just as delusional about getting old. It seems they haven’t developed mechanisms to cope with their delusional stupidity and vacuous dimwittedness. I’m all choked up worrying about their futures.

Boomers are getting old. They just won’t admit it.

BILL WARD
Minneapolis Star Tribune
11-22-12

Fred Hundt grew up in 1960s San Francisco, played in a loud band and tried a little bit of everything on the drug front. “I’m kind of a poster child of the ’60s,” he said.

Now he’s a poster adult for baby boomers, whose embrace of a “sex, drugs and rock ‘n’ roll” lifestyle is coming home to roost as they enter what are supposed to be their golden years.

“I certainly have hearing loss,” admits Hundt, a recovering alcoholic. “And I have friends who have died because of drugs and others who have struggled with hepatitis C and had liver transplants.”

Hearing problems and the threat of hepatitis C and attendant liver complications are perhaps the largest looming problems for the 76 million baby boomers. The Centers for Disease Control and Prevention (CDC) has urged that all boomers get tested for hepatitis C.

But there is some good news for a generation long regarded as hedonistic: Boomers smoke and drink less than their predecessors, and most sexually transmitted diseases they might have incurred in the “free love” era are treatable.

Actually, the biggest hazard for this fiercely youth-obsessed generation might be psychological, said Dr. Robert Kane, director of the University of Minnesota’s Center for Aging.

“What really scares the hell out of me is that they’re totally unprepared for old age,” he said. In Kane’s view, this boomer behavior is a flashback, if you will, to their youth. “I would describe them as people who live for the moment. They are in a huge state of denial and haven’t adopted the mechanisms to cope.”

The rate of hearing problems for 65-year-olds has remained steady for decades at 11 percent, Kane said. But a recent Better Hearing Institute study found that about 15 percent of Americans ages 46 to 64 already have hearing problems. On top of that, Kane said, “A large number of people are just not aware that they have hearing loss.”

And they needn’t have played in a loud band to have been afflicted in an era in which concerts featured huge stacks of loudspeakers blasting away at the audience.

But even those who eschewed such concerts are susceptible to hearing loss, often in the form of tinnitus or ringing sensations in a quiet room.

“Exposure to loud noise at any time during life can damage the ear,” said Dr. Philip Hagen, medical director of the Mayo Clinic’s EmbodyHealth.

While Kane and Hagen encouraged all boomers to get hearing tests, the CDC issued an even stronger recommendation in August: “A one-time blood test for hepatitis C should be on every baby boomer’s medical checklist,” director Thomas Frieden said.

The CDC estimates that 3.5 million Americans have the virus and that blanket boomer testing could uncover 800,000 victims and prevent 120,000 deaths. The disease, a viral infection of the liver, can stay dormant for decades.

“Most people with hepatitis C don’t know they’ve got it,” Hagen said. “The big issue for boomers was they may have been infected in an era when we weren’t able to test for hepatitis C.

“If you have ever (used) intravenous drugs, you should get it checked at once. If you have engaged in high-risk sexual activity, multiple partners or men having sex with men, you should get checked.”

Other vices haven’t proven as nettlesome, especially since boomers were less inclined to adopt them for life.

Take smoking, in whatever form. The data on marijuana’s health effects are mixed, with some potential for respiratory problems, both doctors said. As for tobacco, “the boomers are sort of the model citizens, down around 20 percent (usage),” Hagen said. For those who smoked and then quit, “after about 10 years the risk of lung cancer and strokes is approaching the normal population’s risk.”

Alcohol and hard drugs took their collective tolls, but more on abusers than casual users. “The young, hard-core alcoholics and drug addicts generally don’t make it to the ages of current boomers,” Kane said.

Still, those who have made it this far might be in luck, especially since two of the major ailments (hearing loss and hepatitis C) have much more effective treatments than ever.

In a very real sense, a generation that adopted the Who’s mantra “hope I die before I get old” simply doesn’t think it has gotten old yet. As Kane put it, “there’s going to be a wakeup call for a whole lot of people.”

(Contact Bill Ward at bill.ward@startribune.com. Distributed by Scripps Howard News Service, www.shns.com)

QUOTES OF THE DAY

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Posted on 7th October 2012 by Administrator in Economy |Politics |Social Issues

“And I apologize to all of you who are the same age as my grandchildren. And many of you reading this are the same age as my grandchildren. They, like you, are being royally shafted and lied to by our Baby Boomer corporations and government.”  ―    Kurt Vonnegut,    A Man Without a Country

 

“Do you think we enjoy hearing about your brand-new million-dollar home when we can barely afford to eat Kraft Dinner sandwiches in our own grimy little shoe boxes and we’re pushing thirty? A home you won in a genetic lottery, I might add, sheerly by dint of your having been born at the right time in history? You’d last about ten minutes if you were my age these days.”  ―    Douglas Coupland,    Generation X: Tales for an Accelerated Culture

FOR A FEW DOLLARS MORE – PART ONE

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Posted on 29th September 2012 by Administrator in Economy |Politics |Social Issues

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Where life had no value, death, sometimes, had its price. That is why the bounty killers appeared. - For a Few Dollars More

 

“Tell me, isn’t a sheriff supposed to be courageous, loyal and, above all, honest?” - Man with No Name – For a Few Dollars More

Whenever I get an idea for an article I plan to keep it short and sweet. But it never seems to work out that way. Once I start typing, the articles tend to grow exponentially. It happened again with my attempt to make sense of how the United States of America managed to screw our finances up so badly, that an epic collapse is within view to people with their eyes open to facts and the truth. You don’t end up in the predicament we find ourselves in today due to a couple minor mistakes over a short time frame. It took thousands of horrible choices, colossal doses of delusion, a heaping of stupidity, and a mountain of denial over decades to put us on the brink of economic collapse. An unholy amalgamation of demographics, fiat currency, debt, taxes, power and greed have led us to this point. Next we experience collapse, revolution and ultimately, retribution.

Since I’ve identified four major rationales for our impending doom, I’ve decided to write a four part series that can be read in small doses, rather than one enormous article. I don’t want anyone to miss tonight’s episode of Dancing With the Stars, get distracted from the Royal Wedding preparations, or skip the best reality TV show ever – Ben Bernanke’s press conference, while reading an 8,000 word article about the end of America. The four part series will have a Clint Eastwood theme. For a Few Dollars More will address the Baby Boomer impact on America’s decline. A Fistful of Dollars will examine how the creation of the Federal Reserve and the income tax in 1913 set us on a path to ruin. Outlaw Josey Wales will scrutinize the looting of America by a small group of powerful, connected, super rich men lurking in the shadows, but pulling the strings on our puppet politicians. Lastly, Unforgiven  will detail the impending collapse of our economic system and the retribution that will be handed out to the guilty.

Over the last few weeks there seems to be consensus among many financial bloggers, whose credibility is far more trustworthy than the corporate mainstream media, that the country is teetering on the verge of economic collapse due to the complete capture of the government, financial, regulatory, and media by a small group of oligarchs. They have also been described as the super rich, plutarchs, ruling elite, and scum sucking leeches. The bloggers that I have the utmost respect for, including Jesse, Charles Hugh Smith, Mike Shedlock, Yves Smith and Gonzalo Lira have all come to the logical conclusion the horrific economic situation of the country is a direct result of the greed, corruption, fraud, and plundering by a powerful connected group of rich financiers operating without fear of being brought to justice by the authorities.

While pondering the ruminations of these dedicated truth tellers, I was reminded of the Clint Eastwood Spaghetti Western For a Few Dollars More. The quotes above are representative of living in the USA today. There are supposed to be courageous, loyal and honest sheriffs that protect the citizens from crime, corruption and evil doers. But, just as we saw in the Old West of Clint Eastwood movies, the sheriffs are always corrupt and bought off by the evil cattle barons. In a world where life has no value and you can’t rely on law enforcement to protect your interests, the citizens eventually will need to turn to bounty hunters to take care of the bad guys. The bounty hunters of truth reside on the internet. They reside at Zero Hedge, Jesse’s Café Americain, Of Two Minds, Mish, Chris Martenson, and dozens of other anarchist websites. When you can’t trust your government, your bankers, your church, your media, or mega-corporate CEOs, you need to seek the truth where it can be found. The insightful bloggers who courageously print the truth on a daily basis have unanimously concluded that a small band of powerful elite have accumulated undue influence and control over this country, having brought it to the verge of economic collapse. How did this happen? Who is responsible? Why were they permitted to gain this power?

Boomers Come of Age

“If those in charge of our society – politicians, corporate executives, and owners of press and television – can dominate our ideas, they will be secure in their power. They will not need soldiers patrolling the streets. We will control ourselves.” – Howard Zinn

Whenever I direct any blame for our economic woes towards the Baby Boom generation they react as expected. They blame the GI Generation for creating the welfare state. They declare that Generation X and the Millenials are just as greedy and self centered as the Boomers. Boomers are great at blaming, ridiculing and acting pompously, while taking no responsibility for their actions and more importantly their inaction. This generation cannot avoid their responsibility for the state of affairs. They like to take credit for their stand against the Vietnam War and their protests against the man during the 1960s. They don’t like to take credit for turning into materialistic, greedy, selfish, short-term focused bastards. When a generation of 76 million people decides to go in a particular direction, the country will go in that direction. While blaming FDR and the GIs who stormed the beaches of Normandy for creating the unfunded Social Security and Medicare liabilities, the Boomers have been voting since the mid-1960s and have been in control of corporate America and the levers of government since the early 1980s.

The U.S. Congress is dominated by Baby Boomers today and has been dominated by this generation since the 1990s. The Senate has 60 Boomers out of 100, while the House of Representatives has 254 Boomers out of 435 members. Boomers occupied the White House from 1992 through 2008. They have had the political power and control of the agenda for two decades and have failed miserably. Rather than do what was best for the country for the long-term, they took the expedient, easy, vote getting route. Promise more than you could ever deliver and let future generations worry about the consequences. Not one true noble statesman has arisen from this generation of myopic, self centered “Me Generation” political hacks. Even as the country nears the precipice, they continue to address the great issues of the day with talking points supplied by other Baby Boomer PR maggots from Park Avenue. These weasels care not for the country, but worry only about poll numbers and the next election cycle. An apathetic public, dominated by the Baby Boom generation, has the attention span of a gnat. As long as they can make the lease payment on their Escalade, use one of their 15 credit cards at the Mall, be entertained by 600 cable TV stations, play with the latest iSomething, live in their McMansion for two years without making a mortgage payment and consume massive quantities of fast food, then any thoughts of future generations or civic duty are unnecessary. Live for today has been the rallying cry for the Boomer generation. Pot was their drug during the 1960s. Debt has been their drug since 1980.

The drug (debt) dealer for the Baby Boom generation has been the Wall Street mega-banks, coincidentally, run by Boomers. The entire corrupt financial industry is being run by Boomers. The CEOs, CFOs, and the thousands of Harvard MBA VPs that created the fraudulent derivative scheme to bilk billions from clueless municipalities, pension funds and American taxpayers are all Boomers. It is no coincidence that the great debt delusion began in the early 1980’s. Jim Kunstler captured the essence of Boomer transformation:

“The Baby Boomers came back from the land, clipped their pony tails, discovered venture capital, real estate investment trusts, securitization of “consumer” debt, and the Hamptons. Greed was good.”

The Boomer CEO hall of scam has been built on the brilliance and financial acumen of Lloyd (god’s work) Blankfein, Charlie (keep dancing) Prince, Jamie (friend of Obama) Dimon, and the king of the Boomers, Hank (the system is sound) Paulson. These mainstays of crony capitalism led the Boomer charge of greed, greed and more greed. The Baby Boomer generation has been the proverbial pig in a python working its way through the decades as presented below. By 1985, Boomers had entered the work force in full force with the entire generation between the ages of 25 and 42. It will be a great day when the python craps this pig of a generation out the other end.

It is not a coincidence the National Debt growth has far outstripped GDP growth since 1980. Boomers had been spoiled their whole lives and felt they deserved the goodies today while passing the bill to future generations. They voted for politicians who promised them more benefits, more programs, more subsidies, more tax breaks, more military adventures, and more pleasure. And this was “paid for” with more debt. Thirty five years of government debt declining as a percentage of GDP was reversed over the next thirty years starting in 1980, pushing it past the 90% tipping point in the last year. The country is over-indebted to the tune of $9 trillion on a current basis and $100 trillion on a long term accrual basis.

There is no better picture of Boomer decadence and myopia than an historical view of the national savings rate. The parents of the Boomers understood the meaning of sacrifice and investing in the future of the country. During World War II they bought US War Bonds to support the cause. From 1950 through 1985, the savings rate consistently ranged between 7% and 12%. Americans had this odd notion that if you saved more than you spent, you actually got ahead in life. Excess savings were used to invest in new plants and equipment that were used to produce goods and employ more Americans. By 1985, the Boomers considered these notions as quaint and old fashioned. The savings rate methodically declined until it went negative in 2006, just prior to the worldwide financial conflagration. Our inspirational Boomer president George (Mission Accomplished) Bush while waging two wars of choice, asked for the ultimate sacrifice from the Boomers. He solemnly urged them to buy a GM SUV with $0 down and 0% interest for 7 years, so we could defeat the terrorists. The Boomers who ran GMAC were more than happy to make loans to people with no income so they could “purchase” a $40,000 ostentatious gas guzzling hog. They were doing their patriotic duty for the good of the nation. It brings a tear to my eye just thinking about it.

The Boomers not only heeded George’s call, but they did him proud by buying 8,000 sq ft McMansions with $0 down and negative amortization ARMs. Luckily, the executives at the mortgage origination sweatshops were Boomers. They found no good reason to verify income or assets before loaning someone $600,000, because they knew their fellow Boomers at the rating agencies would rate the bundles of these toxic shit loans as AAA so the Boomers on Wall Street could sell them to greater fools. GMAC’s exemplary subprime mortgage arm – Ditech, did a bang up job getting migrant Mexican workers into $450,000 homes in California’s inland empire. As the tsunami of bad debt swept toward shore, delusional Boomers across the land borrowed $500 billion against the inflated value of their McMansions and installed granite counter tops, stainless steel appliances, home theatres, elegant patios, Olympic sized pools, and with the excess home equity, leased a BMW or two. The first devastating tsunami wave hit in 2008 and wiped out billions in faux Boomer wealth. Instead of learning a brutal lesson and reverting back to saving and frugality, the “never say sacrifice” Boomers ventured out to where the waves had subsided looking for more trinkets and treasures.

Tsunami Warning by Mobile Phone

The next tsunami wave is on its way. The delusional Boomers will be surprised again.

The Boomer persona has been formed over the last five decades and the country will deal with the consequences for decades to come. The clean cut Beaver Cleaver children of the 1950s turned into the pot smoking Dobie Gillis of the 1960’s, then into the slimy Gordon Gekkos of the 1980s and ultimately into the eternal wealth seeking Gollums of today.

 

  

This Boomer debt orgy over the last thirty years would have made Caligula blush. Of course, none of this could have happened without the Creature from Jekyll Island. I will address this aspect of our fate in Fistful of Dollars – Part Two.

Now for the righteous indignation from the Boomers that think I have unfairly lumped them all together as one. Their reactions are predictable. Even though they have had the means, the power and the time to reverse the course of USS Titanic, they plowed full steam ahead into the abyss. The GI Generation is dead. Generation X doesn’t hold the reins of power. The Boomer generation needs to look in the mirror to recognize who is to blame.  I’m sure there are a few good Boomers out there somewhere, but as a generation they have failed this country and our unborn generations miserably.

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