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 Post subject: The Occupation
PostPosted: Mon Nov 14, 2011 10:44 am 
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Joined: Wed Sep 23, 2009 9:01 am
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What do you all think of the "Occupy" movement?

I am somewhat sympathetic to their point, and I don't really have any issue with them protesting as they are. But I think they are rapidly losing credibility. If they can't even say what they are protesting or what they expect to have done, I think they just look like a bunch of cry babies. It was fine in the beginning to just be expressing general contempt, but now they need to tell us what they expect to happen or just go home.


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 11:02 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1778
Location: Ottawa, Canada
The whole thing bothers me a great deal. The issue I have with them is, as you point out, they come off as a disorganized crowd of whiny, self-entitled crybabies, sprinkled with a frightening element of violent troublemakers. There definitely is a major problem that warrants discussion, but that topic is lost in the noise, and that frustrates me. I'd love to have an intelligent, informed, rational debate over the numerous issues and problems facing my (X) and subsequent (Y, Millennials) generations, but a lack of a coherent voice makes such a discourse with the Occupiers impossible.

I do think the Boomers benefitted unfairly by gorging on expensive entitlements, new social programs, cheap housing, and heavily subsidized education, while passing the bill on to their descendants through judicious use of debt financing (sorry, DH). And now the current generation is getting hit with the double-whammy of being required to pay full-price for those programs (instead of the debt-financed subsidized rates their parents paid), while simultaneously repaying the debt their parents shuffled off onto them.

Combine that with a rapidly-globalized market that has pushed wages downward while outsourcing many jobs entirely, and housing/education costs that have increased far in excess of inflation, and it's clear to me that these folks have perfectly valid complaints. It just frustrates me that not only are they unable to articulate it, or offer any workable solutions, but they allow themselves to be portrayed as lazy potheads who would rather make a drum circle in a city park than fill out a job application.


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 11:25 am 
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I'm puzzled by this comment:

kombat wrote:
I do think the Boomers benefitted unfairly by gorging on expensive entitlements, new social programs, cheap housing, and heavily subsidized education, while passing the bill on to their descendants through judicious use of debt financing (sorry, DH).


Am I supposed to feel guilty? Because I agree with you. My generation had it comparatively easy, but we were also very productive.

But I'm not so sure it was as easy as some thing.

When we bought our house in 1991 we got an awesome rate, 9.75% and were thrilled with that. The interest rates these days are a gift! We also paid higher taxes because we were still paying off Cold War debt.

I agree that the debt levels now are atrocious. And it is horrible that future generations will be paying for that. But the main reason for that is the wars we've been fighting and extra security spending. I'm not in favor of either of those but it's hard to blame those on the Boomers.

There are some basic rules for sustainable economic growth. You need population growth plus productivity growth. I think both of those are slowing down, at least in the segments that matter. The Boomers were a big growth wave and they are the ones who made the computers, cell phones, highways, internet (Al Gore is a Boomer you know), and everything else that lead to rapid productivity growth. So why shouldn't they have prospered from the growth.

As for entitlements, I'm not sure what you mean. Reagan cut most social entitlements in the 80s, at least in the US. Those have been expanded again much more recently.

The Gen X'ers are the ones who borrowed excessively to buy houses they could "flip." They took out the outrageous student loans. So how is that anyone else's fault? Is it because the Boomers failed to put in guard rails, restrictions?

I never remember if I am an X'er or a Boomer. I was born right around the year that splits the two. But it doesn't really matter.

I guess I pretty much agree with you that things were much easier 20 years ago, but I don't think there is a lot of blame to be placed on anyone and I don't think everything was a rosy as many believe. Interest rates were higher, many things cost a lot more relative to salaries, and the beer was not nearly as good before the X'ers started the microbrewery craze.


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 11:45 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1778
Location: Ottawa, Canada
I perceive the "Boomers' Prosperity" as a confluence of several factors. I do think that they used debt to enjoy cheap education and other programs, but obviously it was never "put to a vote," so it's absurd to hold individual Boomers responsible for the actions of their politicians, particularly when the long-term consequences of those decisions were unknown at the time. So relax, DH, I'm not blaming you personally. :)

Yes, interest rates were pretty high there for a couple of years, but home prices were cheap. Given the choice between paying 9.75% on a $30,000 house, or 4.5% on a $450,000, I'll take the 9.75% loan every time. And don't forget, when mortgages were around 10%, T-bills were paying almost as much (help me out here, 8%?). That's an insane amount of risk-free, guaranteed return in the context of the last decade.

Then our parents just happened to be doing the bulk of their saving and investing during the "Camelot" period of the stock market, where 12% average returns were so common that it became the new standard figure for long-term planning. It's only in the last 10 years of 0 real growth that it's clear how generous such returns were. Again, that's not the Boomers' fault, per se, but they did benefit from it. It was simply a case of being in the right place (North America) in the right generation (Boomer). Bully for them, but it sucks for their kids.


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 12:35 pm 
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I didn't take it personally, I was just a little confused by your statement.

In any event, I completely agree that there was a period of prosperity that seems to have come to an end. But just a couple of comments...

First, people certainly took out student loans when I was in college. But graduating owing a few thousand and taking a $30,000 job was typical, and most people I knew either worked to avoid loans or their parents just paid outright (or they got scholarships). Anyone who had as much as $10000 in debt was considered pretty dumb back then. And that was 1/3 of the typical starting salary. That

In-state tuition was fairly cheap because the state paid 75% of the cost of your education on the theory that you'd stick around and contribute to the economic development of the state.

Now, guess what happened. Those people didn't stick around and contribute. They moved off to California, Washington, etc. to contribute to those economies. So people started saying, sometimes out loud, that maybe taxpayers should not be subsidizing education like that. So what you are seeing is a shift away from subsidies and a rapid rise in in-state tuition. So did the Boomers screw things up for this generation? Maybe. But not by borrowing too much. They did it by being mobile.

And as I said before, the Camelot period was a lucky break. But really the stock market returned about 6% over inflation and inflation was running about 5%. That 5% is kind of related to the sum of population growth plus productivity growth. Both of those have slowed. Population in the 30s-50s age group, the most productive and the biggest spenders, might actually be decreasing.

And I think our biggest productivity growth is behind us. We've had a huge technology explosion in the last 50 years and it is not reasonable to expect the pace to continue. Plus as those Boomers age they'll be a drag on the economy. And, 9/11 made up devote about 2% of GDP to security. That comes directly off of the growth because it has essentially zero contribution to productivity.

I remember posting something to this effect about 2 years ago when I first joined this forum. I could go look it up but I think I predicted back then that we'd see near zero growth and inflation and Treasury rates around 3%. That's not too far from what we have. I am certainly not an economic genius, but this isn't rocket science either. We simply can't have good market returns if no one is spending money. And spending depends on growing production, either because there are more people producing or because they are more efficient.

So, I'm not at all surprised how things are playing out. I expect this to be how the medium-long term looks. We'll have near zero inflation, near zero bond yields, and stock market returns averaging 5-6%, at least in the US. Europe will be similar or worse. And with much of the world market leaders stuck in the mud it will be up to China, India, Latin American, and so forth to carry the economic torch. Canada can help but with such a small population and being so closely tied with the US, I don't think it can do much better than us. I'm guessing we'll start to see serious improvement around 2020.


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 5:33 pm 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1148
Location: Illinois
DoingHomework wrote:
If they can't even say what they are protesting or what they expect to have done, I think they just look like a bunch of cry babies.

This is pretty much my take on it. I've seen a few try to articulate their demands, but it has always been something silly like eliminating all debt or confiscating all the wealth and spreading it out evenly.

I do also get a little annoyed by them trying to lump me in with them. I'm certainly not in the top 1%, so apparently I must agree with them as they are the remaining 99% :)


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 5:39 pm 
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bpgui wrote:
I do also get a little annoyed by them trying to lump me in with them. I'm certainly not in the top 1%, so apparently I must agree with them as they are the remaining 99% :)


I saw something the other day that said it takes about $343,000 in household income to be in the 1%. We're not there but we're dangerously close. I suspect we'd make the 2% and based on what a few people on this forum have stated, so would they. We're talking gross household income here. That means the 1% includes an awful lot of farmers and mom/pop small businesses.

Like I said, I can maybe support their cause but I'd kind of like to know what it is. I agree that bank CEOs making tens of millions after needing a taxpayer bailout needs to be fixed. But I just haven't heard an actual plan.

Even Robinhood had a plan!


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 6:00 pm 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1148
Location: Illinois
I must have seen the same thing you have, as I had the exact same number in my head.

I'm not there and won't likely be unless I up and move to BigLaw in Chicago, New York, etc. (hell freeze over), but I imagine were are in the top 5% maybe higher.

This link says top 5% is about $160,000 and top 1% us $380,000. If accurate, I'd say we are in the 3 or 4%.

You're right, I know several farmers that are pushing the 1%.


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 Post subject: Re: The Occupation
PostPosted: Mon Nov 14, 2011 6:19 pm 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1148
Location: Illinois
It helps when I actually post the link I reference :)

http://www.financialsamurai.com/2011/04/12/how-much-money-do-the-top-income-earners-make-percent/


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