We’re all in this together

I enjoy reading blogs and reading what people others have to say.  So many unemployed young people think that we can solve the problem of unemployment if baby boomers (and of course, it is assumed that all of them lived above their means) would drop out of the workforce. I’m not sure there would be enough jobs even if the older folk would just retire.  Older folk – I’m only 50 – I have the energy of a 20 year old and I feel like I’m being called an old geezer. What the younger people don’t understand is that I know what it’s like to be 20 years old – they don’t know how it feels to be 50 and no longer needed.

I have sympathy for them though. I found it very easy to find a job in the 1980s. I wish we could give them a chance and some hope. They shouldn’t feel despair at such a young age. I’m not sure I should be feeling despair at 50 but I see it in the faces of people I talk to. How do we create opportunity for the younger generation without adding to the problem of homelessness in the older generation?

A Generational Perfect Storm – Boomerang Kids Meet the Homeless Baby Boomers

By: Jeff Berwick | Sun, Sep 19, 2010



When times are good, or at least relatively good, unsustainable trends can appear sustainable. The now-aging baby boomers who had a lot of their wealth tied up in their home and the stock market were feeling great. They had just come off of a 20 year super-bull market in equities and up until 2007 they were seeing the value of their home increase by leaps and bounds every year.

Sure, their kids were scraping by on credit card and student loan debt. But there were jobs to be found and even if they couldn’t scrape by they could always count on some help, and even housing, from Mom and Pop.

However, in 2007, everything changed. The inflationary game that the likes of Alan Greenspan, Paul Krugman and Ben Bernanke had been playing reached its inevitable conclusion: a massively overindebted economy teaming with unsustainable malinvestments that had to be purged.

And now, with baby boomers reaching “retirement age” and expecting to receive public and private pensions and retire on their assets which have been invested in the stock market and housing, all of a sudden, everything has changed. Meanwhile, their prodigy, the most indebted, unemployed generation in history are going to be expected to somehow pay for the bankrupt social security system that is already in deficit.

Let’s take a closer look at these two groups and the dire predicament they will soon find themselves in.

The Baby Boomers

At one end of the spectrum, the baby boomers have been getting annihilated. Not all, of course, but the majority. They lost trillions in the stock crash of ’08 and now, like scared lemmings, are running headlong into the next great disaster, US Government bonds, where they will likely lose a significant portion of what they have remaining – either through inflation, rising interest rates or outright default of the debt.

And, just as the baby boomers lose their last bit of savings the US government will announce that the bankrupt Social Security system will either be gone, altogether, cut back significantly or the payments will be inflated into worthlessness. This year, for the first time in nearly 30 years, Social Security will pay out more benefits than it receives in payroll taxes. The same goes for 2011 and by 2015 the program is expected to regularly operate with an annual deficit.

And for the baby boomers who have state and corporate pensions, who do you think lost the most money in the stock collapse of ’08 and is also one of those running headlong into the coming bond implosion? You got it. The pension funds.

The Iowa state pension fund’s value dropped over $3 billion in the course of 2008, putting it at a total deficit of nearly $5 billion. A report by the University of Kansas described that state’s pension fund as “bankrupt,” with a projected shortfall between assets and payout obligations of $8.3 billion in the next 25 years.

The New York state retirement fund lost $23 billion in 2008. And the largest fund of them all, the California Public Employee Retirement System (CALPERS) and the California State Teacher Retirement System (CALSTRS), together lost a total of $100 billion of their high of $260 billion in assets after the 2008 crash.

In other words, just as the baby boomers have been wiped out by the stock collapse of ’08 and the coming bond collapse they will look to fall back upon their pensions and Social Security. Both of which will either be gone or inflated to levels not even allowing a meagre existence.

And that is if the government itself does not confiscate pensions and retirement savings and demand that they be put into soon-to-be-worthless government debt. Far fetched? Spain’s secretary of state for social security, Octavio Granada, was recently quoted as saying that by the end of 2010 some 90% of all Spanish pension savings will be “invested” in domestic government debt. Spain isn’t some 3rd world banana republic and they are already moving strongly in this direction. With trillion dollar deficits as far as the eye can see, where else can the US Government hope to get the money to fund all their debt?

So, that leaves two last options for baby boomers hoping to retire. The value of their house and their “retirement” savings.

The housing market has been decimated, as is public knowledge, but many don’t realize it is still going to get worse. Much worse. A record 25.5% drop in home sales was just reported in July and has contributed to a record level of unsold inventories of homes for sale.

Inventories of existing homes for sale as measured by months supply broke an all-time record in July. Normally it would take four to five months to sell the outstanding amount of homes for sale in the US. The current amount of supply available will take 12.5 months to sell at current levels.

This level of supply will put additional downward pressure on house prices. Total housing inventory at the end of July increased 2.5% to 3.98 million existing homes available for sale.

And so, just as Ma’ and Pa’ find themselves wiped out from the crash of ’08 and the coming bond collapse they will receive notice that their pensions have gone under and/or have been cut back dramatically. They will then look to try to sell their home, or at least get a reverse-mortgage to get some sort of income, but the value of their house will have dropped significantly.

As for savings, in a 2009 Retirement Confidence Survey by the Employee Benefits Research Institute, 53% of workers in the U.S. have less than $25,000 in total savings and investments and even most of that will likely disappear in the bond collapse and we will see millions of destitute baby boomers.

Where will they turn, to their kids?

Boomerang Kids

Much has been written over the last decade or two about “Boomerang Kids”. The term, generally, means an adult in their 20s, 30s and sometimes 40s who returns home to live with their parents after an unsuccessful foray in the real world.

Often this condition is caused by the inflationary world we have been living in for the last few decades. Stealth inflation has slowly stolen from everyone leaving many younger people without the ability to afford even basic living expenses much less a home for themselves. Not to mention student loans sometimes reaching into the 6 figures, for a degree most of them will never use or need, that they’ll be paying off for much of their adult life. And the US government has enacted legislation which never allows this debt to be repudiated even in a bankruptcy. That is bad news for students who now have a combined $830 billion in student loan debts, growing at $3,000 per second – now the biggest area of personal indebtedness, surpassing credit card debt.

These 20, 30 and 40-somethings are heavily indebted and looking at the worst job market in 80 years as estimated by Shadowstats.com (a much more realistic picture of US unemployment) with unemployment at 22% and rising.

In fact, there is a new name for all the people who have been unemployed for years: “the ’99ers”. These people, who already number more than a million, are Americans who have already used up their 99 weeks (nearly 2 years) of unemployment benefits. You can see just how dire and desperate the situation is for millions of Americans by checking out the forum at a site called Unemployed Friends. It is a message board for the unemployed in America and, sadly, countless of the messages talk of and end in suicide.

And so, what happens when the heavily indebted, unemployed, depressed and sometimes suicidal boomerang kids find that mom & pop not only had to reverse mortgage their home just to make basic living expenses and may soon be looking to the working-age child to provide them with a means of subsistence?

We don’t know the answer to that but it isn’t going to be pretty.



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7 Responses to We’re all in this together

  1. Robert says:

    Much better written than my blog!

  2. Yeah, the “think positive” refrain gets old, especially when it’s coming from someone who has remained untouched by the economy. We all have our own experiences, and they color our worldviews. It’s next to impossible to remain positive when the wolves are at the door. Yes, I am not starving. We have very supportive family so we will never be “homeless” (although if we lose my home I will feel homeless, even if I am never on the street). I am supposed to be grateful for all of that, that I won’t face someone else’s worst case scenario. I can only live my life, though, and the idea of putting everything in storage and cramming into my in-laws’ house house holds no appeal. I just want a way out, and none seems to be forthcoming. I try to keep my chin up, for the sake of my kids. It’s very hard.

    • Natasha says:

      I want a way out of this stress of wondering what I will do if I can’t generate an income to keep my house because if I lose my house it will be much more expensive to rent an apartment. The pursuit of happiness should not be dependent on finances but not knowing where I will be living in the near future (because of lack of income) keeps me awake at night. So it’s difficult to feel happy – especially when I’m still grieving the death of my husband.

  3. I can’t even imagine dealing with profound grief on top of all of this. I’m so sorry. We are in a similar situation… apartments in this area are as expensive as my mortgage. If my husband could get any permanent job we might be able to refi…. If, if, if.

  4. Natasha says:

    The grief is only adding to the problem. It is also difficult to discuss in an interview when I’m asked about my employment gap – I was caregiver for my husband for the first few months after my job ended. My mortgage and property taxes are less than 1/2 the cost of a 1-bedroom apartment so I don’t know what I’d do if I lost the house. And the refi requirements further marginalize the unemployed. My banker will require 2 consecutive months of pay stubs and a letter from an employer providing income information for the future. Not an easy task when one is using temp agencies. Your husband is fortunate to get his foot in the door at an agency. It is difficult to get the first assignment these days as temp positions are also scarce. He can begin to close the employment gap on his resume by using an agency. Best of luck to you and your family.

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