On the Unbearable Unfairness of Life

Yeah, “Greatest Generation” my foot! You guys had it easy because you started with no expectations. You didn’t take on debt because you were afraid to, convinced as you were that a post-war depression was in the offing. Instead, there was pent up demand for almost everything and the savings to pay for it. So you became the world’s greatest producer of manufactured goods. And, from the fabulous profits, the companies that made things paid you well and gave you excellent pensions and paid for all your medical needs.

And you had us. You carefully eschewed the good life yourselves so you could save for us. You were absurdly concerned about passing on your wealth to us so we wouldn’t have to struggle like you did (or thought you did). You showered us with clothes and cars and vacations and college educations so we would have it better than you.

What you gave us, really, was a total distaste for delayed gratification. You gave us a vigorous economy and the expectation that it would be that way forever. Your conversations about saving for a rainy day were muted, so we didn’t save, we spent. and when we didn’t have the cash we bought on the cuff.

Economies grow when there is cash to pay for stuff. Economies grow when money borrowed can be paid back. When we get to the point that we’re paying for the basics with borrowings we can’t pay back, it’s over. We are there now. Everywhere. Every sector of the global economy is past the point of being able to pay back the debt we are now taking on to pay for the basics: salaries, pensions, groceries, haircuts.

Why didn’t you tell us? Why didn’t you prepare us for this? Well, we’ll show you. We’ll take out second mortgages to pay hundreds of thousands of dollars for our kids to go to college to become bankruptcy lawyers. It’ll be the wrong thing to do, of course. After they handle our personal bankruptcy the world will be back on a cash basis and won’t need their services anymore. So, there!


The reaction rally of the past couple of weeks has now retraced about 62% of the previous decline-a typical place to stop. Anything can happen, of course, but the least surprising thing to me would be for the rally to end abruptly with the FOMC announcement tomorrow at 12:30 (I have no idea what the announcement will be), and for the bear market to resume.



No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.


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