It's time the New Zealand family had that difficult discussion about intergenerational wealth and debt because the current situation cannot be sustained

As long as “Key’s Geedy Slave Driver Club” is dominating our daily life’s, nothing is going to change. For many families and the younger generation life becomes unaffordable.  

Riots in the streets will finally make some impact for changes, when it is almost too late. Inequality is divorcing the nation leading to severe consequences.

Funny how our parents did not have the same view of us baby boomers.  (And we have done all we can for our children.) Not only did our parents' parents live with them but they were willing to pay high taxes and do everything they could so that their children could have a good life.  And funnily enough so did the rest of the world.  The world had an economic structure that enabled this to be done. Don't play the blame game Bernard.  Look at the economic structure that has been in existence for the past thirty years.  Nothing will alter while ever that continues.

We are not Greece.  Japan, a sovereign Country as we are, has 200% debt to GDP and it continues on.  We don't need to borrow we can print.  This idea that government printing is bad Government borrowing is good is stupid.  After all Banks print the stuff through their fractional reserve system.  It all depends on the shortage of goods for inflation to occur.  (Houses anyone or is that just a giant ponzi scheme in which we all participate). Taxation can withdraw the printed money as repaying loans does for the borrowed money

This is yet another 'bash the boomer' effort by BH. The damage is not being done by the better off elderly, it is coming from the system that encourages banks to flood the market with cheap credit and a political system structured to feed pork to voters in an economy built on property speculation.

If the current mob lose to Shearer et al in 014, expect a deluge of pork to be sliced and diced for Shearer's support base..that means a rapid entry into the piigs hole.

The best and brightest will leave in even greater numbers, while the destitute and needy will flood in to prop up Shearer's mob and live off the pork.

So let's see if Bernard can make an effort to end the banking rort...the deliberate destructive and dirty little game. Currently this economy is feeding the big four fat profits extracted on the back of created credit sold as drugs to Kiwi peasants.

And it's high time Bernard said something about the dirty political system as well....a system in need of gutting to remove the cancerous behaviour of those involved in buying power.

Perhaps the young and the poor need to make clear what happens if nothing changes. Here's a few things they could say in a letter to their parents to get the conversation started.

The presumption that families are dysfunctional and have little comunication is probably not the norm . I speak to my son most days and he is enjoying living in his Grandmother's house while she lives at mine.

What's more he is very pragmatic about the current lack of employment opportunities, but is cognizant that lack of talent has a very high price and that poverty could be it. He is nevertheless, optimistic regardless of the fact that his Father is one mouse click away from poverty himself, given the way government approved financial pirates operate.  - witness MF Global etc - there are no safe havens and handouts for the old or young. - get over it.

Bash, Baby, Bash, Bloody Baby Boomers! Or maybe it should be BBBBBB... yeehaa!

The current account deficit still strikes me as the best score as to whether we are spending more than we earn- so depriving future generations of income, and loading them with debt. Given we have had a significant current account deficit for 40 years; we have effectively borrowed off the future for that period. Bill English's rosiest forecasts suggest the deficit is going to 6.7% of GDP by 2016. That's $16.8 billion per annum; or over $300 million per week.  Factor in health and pension costs of ageing, then this is unsustainable as Bernard says. Many young capable people will opt out of helping pay for it, by moving offshore, thus making it worse.

So what solution? Higher taxes? Not great for productivity, although some may be necessary. Means tested pensions?- sensible but will not get past Grey Power and the Winston mob, or John Key for that matter. Property taxes?; could be helpful. Make government decisions based on the current account a priority.

I actually think Patricia is closest to the mark in terms of effective solutions that are politically acceptable. Print enough to lower the exchange rate to sustainable and competitive levels; meanwhile also reducing the government debt from what it otherwise would be. If managed as per the UK, printing would cause inflation in imported goods and services, making lower production more competitive. Overall inflation of say 5% as per the UK, while higher than an ideal world, would reduce debt burdens. 

Remember that we don't live in an ideal world- we are losing $300 million a week, and that has to change. Critics of this solution do not seem to come up with effective alternatives.

Bernard Hickey...I salute your editorial savy, your persistance to the topic that keeps you up nights,your ability to pull the burning issues ( real estate/ Boomer baiting or sometimes both in the same storyline)....................but , your Dear Mum and Dad story demonstrates a lack of objectivity , which belies your ability to invite your reader to consider the article on it's merits alone.

You say the conversation is not being had...? in my case you are wrong, and I am sure many others( that number growing)  are having the conversation with their children about wealth transfer as a means to protect their  (the childrens) future.

Moreover the conversation with them about what we can do to relieve any possible financial ecumberances upon them going forward...you really don't think we care about not being a burden......?????    You are just ...........wrong.

You see ,your misdiagnosis here is that you make assumptions about "the  family" that appear to have little basis in fact or experience.

I would love to have just thown some flippant comments back at you on this as it's probably what it deserves, ( the approach I mean not the intention of the story )

It turns out the Big Fat flatulating Elephant in the room is concerned,that his one day caregiver to be (possibly only), hasn't noticed the trumpeting for the generational wall he put up to ensure his/her sense of identity was not sullied  or inquired of by the annoying Probocidea .

The concern you should be focused on, is the large number of soon to be superannuants who arrive at that point unprepared in any way to sustain a decent standard of living, ....who will go on to burden the state.....who will have had little or no reason to have "the conversation" with their offspring as the point will be moot.

Do please give an example of that conversation, I'd love to read it.

While your at it, you may want to give some of that intellectual time of yours to thinking up  more sustainable , balanced ,"fair" social welfare reforms, so as to shift at least some of the burden unnecessessarily placed upon the Taxpayer current and future.

Dear Son and Daughter

I take this opportunity to apologise to yourselves for your Mother and I being born into a time where State funded services were the normal practice of the Governments of the day. Further for misrepresenting to you, our intentions to Capitalise at every opportunity during this period of State funding, with the express intention of extracting as much wealth and(free?)services from the economy as we could, knowing we would arrive at this Utopic place having squirreled it all away, only to cash in all over again while you pick up the tab.......................yes that was the plan

We have since, through guilt and remorse for our disgusting life of selfishness, been given cause to review and revise "the plan" as it was, to find a suitable way to transfer these ill gotten gains to yourselves without fueling further your insatiable appetite for leveraged / credit card debt. This for us, is a conundrum as we have observed over your lifetimes that you subscribe to an " I want it now and worry later " policy , which you may find conflicts directly with the plan of easing your ..future...burden.

love Mom N PopXXXXXXX

Dear daughter and son,

As a member of the BB generation I say sorry to you for letting the corrupt, greedy and unethical process in human behaviour flourish. Over 40 years working hard and making a good living for ourselves, we did nothing to stop an obviously corrupt system, we do nothing to stop the current  “Key’s Greedy Slave Driver Club”  dominating our daily life’s.  For many, but especially  families and the younger generation life becomes unaffordable. Inequality is divorcing the nation leading to severe, social, financial and economic consequences.

Hopefully you have the desire for a better, more honest world. Riots with you participation in the streets will finally make some impact for changes, when it is almost too late – I wish you good luck !

Your dad.

http://www.marketoracle.co.uk/Article35552.html

REDEMPTION

It has long been known among the Socialist elite that when fighting the "war" against the Capitalist elite, the essential mantra is, our foundation stone is to attack wealth and defend poverty. Wealth cannot defend itself. Poverty can. Within the realms of the media, (main stream or fringe) it is not the done thing to attack poverty and defend wealth.

Bernard. Thats what you are doing with regular doses. Attacking that what cant defend itself. It must be that time of month again.

As I read your daily Top-Ten bulletins I notice how there is a bias to rely on many overseas articles that analyse to death the impending implosion of China. Many of the articles even name names and name institutions. But, that's alright because they can't defend themselves here in New Zealand. Then there is the Eurozone, and Greece and the list goes on, of people or organisations who can't defend themselves.

There is enough going on in New Zealand that could and should focus your attention and deserving of your wrath. But you don't. And I wonder why. The only time you do turn your attention to domestic issues with a bit of acid, is to dredge up the one favourite you can do without any recrimination.

In your article you draw a line in the sand at 1970, yet the global events that brought about the situation was in the 2000's, and the beneficiaries of that explosion were all property owners with a double-dip prize to those who also had debt and mortgages. As Wolly points out at the top of these posts, it is the system that allowed it in the first place (going in) rather than the recipients on the other end (coming out). Fix the system going in with a fence at the top of the cliff instead of queuing up ambulances at the bottom of the cliff.

Redeem yourself. Would you like a list of institutions?

Jeez..Christov...some long words that I have never even heard of, never mind used. Well said...I thunk???.

Flatulating, is that where you build a flat on the side of yer house...on the off chance a woman with 10 kids can come and stay for nowt, but you pay em 50K per year for the privilidge....and let em pay orf money lenders at higher Interest, than even this site.

Or is it where you bend over forwards to accommodate another "Trust me, I know what I am doing".. Civil Serpent to spend yer hard earned....WINDFALL and life's savings.

Cos either one can blow up in yer face....and become a REAL liability....if ya let em.

Don't play with matches...(Nothing matches).

So go easy on them long words, I ain't edumacated.....like the big fella, come back from overseas, come to tell us where we went so wrong....

Just what this country needs, another ex-spert from overseas printing and publishing a new version of the TRUTH.

So be careful about that inflated ego.....that too can blow up in yer face and may Herald the makings of a new publishing empire.

(Though  broadly speaking I think broadshite is dead, I got a free copy of the Sunday version today......otherwise...I might not even know what the Flatulating Hell yer on about..)

But I am sure there may be little interest in it for .....us...bludgers.

Especially if they get our facts...and farts wrong.

But I concur......I thunk.

PS..What I  told .....My kids....and it was not in a letter.

I will stand by you in whatever you chose to do....but do not stand there with yer HAND OUT.

And they don't.

And they never will....edumacated...see.

Praise be.....(It is Sunday and this Heralds a new low for me, but it was raining)

So - Bernard, after all we've given him, still thinks on terms of 'improving' the birthrate?

So help me, I thought he was the smartes of the bunch, that's why I started posting here. Doesn't say much for the rest.

Answer the question, Bernard Hickey - Do you think that MORE people hereabouts is the answer? If so, where do you envisage the process stopping? Bangladesh/Haiti/Rwanda levels?

Anf if you think the answer IS more, I say to you "Bollocks, you've been given enough info to know better.".

"Most of all, everyone must find a way to be more productive and boost economic growth in years to come"

Bollocks again. Productive has two parts - a trend to zero wages, and efficiencies. The first is a scrap withing a contained game, the latter is indeed a valid pursuit, but limited.  You've been told this Economic growth within a finite sphere of operations cannot go forever, and you are seeing it peaking globally now. Sure, a country this size with 4 million people has some headroom - until we are like Rwanda.

No reply as usual, I bet. The Emperor still with raiment begarbed.

"So why aren't we having this difficult conversation now?'

Ahh, because NZder's are renowned for putting their heads in the sand on real critical issues and only elect politicians who do the same!

It sounds unfair but unfortunately its 100% true, hence we have ridiculous legislation like WFF, KWS, and a DPB many solo mums get rich on. We have a pension scheme where you can be super rich with 100 properties under your belt and STILL claim a pension!

We have sold and continue to allow the sale of every piece of taxpayer utility infrastructure for life's essentials, and THEN have the audacity to wonder why such things get more and more expensive beyond inflation

We allow multi conglomerates to pollute every lake and stream in the country and THEN pretend to the world that we are "100% PURE".

We are actually contemplating selling our WATER to one racist party/culture or a group of corporations, not seen anywhere in the world since the riots in Bolivia where 131 people were killed in the process of not letting it happen. But...............watch as sleepy sheepy old NZ lets it happen..........and then complains for decades afterwards how they were robbed YET did nothing to stop it much like the sale of our Telecommunications.  

Houses are too expensive in the centres causing younger generations to move abroad or take on crazy debt levels. And house prices are still going up in price due to these supply and demand (and easy credit) levels.

So the government should;

state that all new immigrants can only buy new build properties (not demo and old property on the site)

tax land bankers

release more land.

There is that line between giving your children too much(que spoilt unemployed drug cousin). and steering them towards creating their own wealth.     It also depends on how many children you have.    If I ask my parents to give up some of their wealth for me, what about my brothers and sisters?

I don't think my parents should give up any of their wealth.     Maybe pay off the remains of my studen loan, but then again it is only still around because I didn't want to live at home any longer when I turned 18!     They did give us 10k towards our first home, but that was a trade off for wedding money - means we probably won't get married unless it is at home, waste of money really, weddings.

Might see a change when the grandkids come along but you're right they have not come yet because it's too expensive..

When I was 20 I had no money and all the houses companies and farms were owned by the 60 year olds.  It's pretty much the same now, forty years later. 

And those former 60 year olds have now all dropped off the end of the conveyer belt.

And all the generations including the 20 year olds, have more now , in a material and consumption sense.

Explain to me what the problem is again.

YES We can lay the blame at the feet of Mum and Dad...

We have raised our younger generations with a materialist , I want attitude with a lack of pioties in life....This being a result of providing a secure home, food on the table envioroment.

This has a resulted in the next generations considering a roof over the head, food on the table a given right, therefore they piorities are cell phones, cars more expensive than needed...label clothes and want to run before walking.

When a population proities a cell phone, car, clothes over and above food and roof, they cant throw stones at a generation that put a roof and food on the table 1st.

BH mentions extending retirement age (I dont have an issue with that) and theolder generation "mentoring"   well here is the mentoring....learn what is neassary, (food roof) and throw way those expesive cars, expensive star wars communicators and the expenses related to maintaining these....

It is this that is the great difference between the BBs and those following behind.

Yep bring on a Greece, educate our younger generations who have not seen a major crisis/war in over 70yrs...THEN their proties will change, nothing like an emty stomach to motivate and an expensive car with no fuel to put in it..a usesless hunk of steel and plastic.

Steps

.

Forgive my cynicism David C....but is this thread being given the chop as a non starter...?

NO christov. It's just starting. It will only die if you let it.

YES. It is a necessary conversation that is worth having. It is to be hoped that BERNARDS next chapters are an examination of the contributing factors that have gone into this situation, and not simply a re-gurgitation of the same-old same-old as has been going on for the past two or three years. One hopes that this conversation can do society a genuine favour and progress to some genuine destination. If you dont ask the right questions you can never get the right answers.

Here are potential headings for the next four chapters

(a) GOVERNMENT. What influence have government policies had on the prices of land and housing. Look no further than a DC article elsewhere today about the strangulation of the components that go into this mix by government central and local. Remember that each member of society is presumed to act in their own selfish interest. So even the most dim-witted member of society knows that in response to government policies, prices of housing must rise. So jump on board folks. That's the subliminal message from your leaders.

(b) IMMIGRATION. On several occasions, poster OMG has correctly pointed out that prices are set at the margin. So does it make sense to continue to allow immigration of (one) wealthy individual to arrive into Auckland and buy a dwelling in a prime position at a price that is chump-change to that new arrival but absolutely un-affordable to the local first-home buyer. Remember that, that one new arrival is re-setting the pricing threshhold for all houses from that day on. Until the affordability and strangulation questions are fixed, all inbound immigration should cease.

(c) CRISTCHURCH has obviously caused a serious dislocation to mobility and re-location of a large chunk of new zealand society (chch being the second largest city in new zealand) many residents are re-locating north (to Auckland?) at a time when competing overseas contestants are able to outprice them.

(d) MONEY LAUNDERING: Hot money is coming into New Zealand destined for the property market. I have commented on this issue in the past so wont repeat it. But the issue is there. Never gets any traction though. Refer the recommendation that all new migrants into the country with serious money should be required to produce a tax-clearance-certificate from their country of origin.

My brother and I have just had this exact converstation with our parents.

"If you want to have the farm stay in the family, you will have to gift the difference between what we can pay and what the market value is otherwise we won't be able to stay in NZ and will be moving to Aus".

It sounds like a bit like blackmail, and in some ways it is, but the reality is unless we take on a crippling mortgage we cannot stay here.  It was a very uncomfortable conversation/process and involved A LOT of compromise from both sides. 

Bernard is right this is a conversation NZ in general needs to be having - without playing the blame game as to why it is such a mess.  Forget the extremes of society that make the headlines.  If we want the working middle class to stay and live/work/support this economy then we all need to take a long hard look at the options.

- A generation Y

Great comments.  But Iconoclast has my vote...the old have always held the $, but generally recycyle it via bank deposits and interfamily arrangements like helping a grnadchild into a home or through an education.

Hmmm.  Home.  Hmmm.  Education.

Hinge points of the two greatest bubbles...

Homes - see the myriad of writing and check Median Multiples.  It's really bad:  the product quality is indifferent, the price (especially for land) is quite simply a rort, and the combinatory effects of cheap credit, money laundering, safe haven, economically dopey zoning regulation and all of the above, mean that the debt load needed to carry it all is crippling.

Education - if you follow Instapundit, you'll know his take:  it's reached the point in the credentialism cycle where there is quite broadly no possibility of recouping the education outlay via increased lifetime earnings.  And he's speaking from within a ZIRP environment!

Ah well, BH,  us oldsters can contribute Wisdom.  At least aboot the Causes.

Solutions elude us all...

Yet another Hickey horror story.

Cest la vie........sigh..

Dear Peter and Penny

Its May 2018. Your mum and I have just been out to a nice dinner and were thinking of the key lessons we could pass onto you guys as you make your way in the world. Although you are both only toddlers now, we think in 5-10 years time the following points will still be relevant:

• Never waste time blaming others for your predicament. This is particularly the case with the government. Realistically, you have one vote out of about 3 million and consequently they are outside of your sphere of control. Accept the fact that they are a bunch of self-interested losers who (with a few exceptions) cannot get a real job anywhere else - and move on to figure out how you can use the existing system to your advantage.
• Equally, don't waste time moaning about previous generations and how they benefitted from a free university education, fantastic house price increases, and Woodstock (the concert not the bourban). Life is unfair, but it feels a lot fairer when you have achieved something with yours.
• Relationships matter, be they with your family, friends or your wider contact base (you won't remember this but there was once a crazy website called Facebook where, before it folded in 2015, you could make a real fool of yourself online. Can you believe that!). Ultimately people only do meaningful business with people that they like, so its important to treat others how you want to be treated yourself.
• You will always be best at the things you enjoy most. Never study a subject at school or university because you think (or others think) that it might 'do you some good'. Rather, concentrate your studies on the things you are passionate about. Later in life it will be this passion that gets you up in the morning (not the money you earn or the so-called 'respectability' of your profession).
• Be grateful for your life. Every morning when you brush your teeth think of something you are truly grateful for and carry this thought for the rest of the day (p.s. based on your mum and I this probably won't be your looks...)

Well thats about it guys, life is simple when you boil it down.

Lots of love, Mum and Dad

Bernard - you are right - but your argument is flawed.

Teaser Headline on home page - “Older property owners have to give up some of their wealth”
Headline at top of article - "It's time the NZ family had that difficult discussion about inter-generational wealth and debt".

The flaws in Bernard Hickey's article are these - it's not an age issue - it's an ownership issue - and yes the wind-fall wealth created by the boom should be sprinkled around a bit and re-distributed, but, to which demographic?, and if you must bring age into it, who were the biggest winners? who should bear the biggest burden?

(a) The issue he wrestles with is the wind-fall profits that accrued as a result of the 2001-2009 property boom. They are not an age problem. The problem is identified as a property-owning problem. ALL owners of property benefitted. Not just the elderly. Of the property owners:- Those who benefitted the least were those who had most equity in their home. Property owners who benefitted the most were those who had the least equity in their home ie those with mortgages.

(b) Without any supporting evidence (until proven otherwise) I am going to assume that as a group, the elderly would have held the most equity, while the next generation down, ie genXers would have held the least equity, but benefitted the most.

(c) The questions Bernard does not address are

•  who should bear the burden
•  transfer BB to genX? why
•  transfer BB to genY? yes they should bear some of the burden
•  transfer from genX to genY? yes they should bear the greatest burden

Happy to be corrected Bernard. Next question is - how would you do it.

Bernard, if i sit down with the kids and grand kids and we all can agree then all of NZ problems will be solved. Are you for real?

Bernard, as you know i have fought you and others over your BB bashing for some time now. This is not because i agree or disagree with the issue. It is because you and Alex and others just don't get it. You seem to think that if you single out one section of society and crucify them then ALL YOUR problems will be solved. This is nonsense and the sooner you wake up to this fact the sooner a solution may be found.

Baby Boomers In Denial

There are so many baby boomers here giving Bernard a hard time for wanting to debate a very important issue.  Of course we need to fix the system as well but that won’t change the current reality or any of the points Bernard makes.  As Bernard says and as you have all demonstrated so well the baby boomers have all the influence so nothing will change until we start down the cliff face.

It's easy to see all the reasons why Bernard is wrong when doing so means you can maintain your hold on all the countries assets with a clean conscience.

Do we really care about daughter and son ?

As a member of the BB generation I think we deserve a good bashing. Looking into the current worldwide circumstances - we failed miserably creating a better world after the war. I cannot believe how many people here are ignoring the facts. Our generation accepted unethical, greedy and corrupt behaviour – almost in silence. The increasingly negative impact not only directly on us humans, but our environment and nature are visible everywhere.

What’s left is a big mess on many fronts, which the next generation has to "clean up" – almost unbearable and prohibitively expensive.

…and for once BB’s should stop and tell children good night stories.

Praying like crazy it just slides off the page.......almost there Bernard.....!

The whole debate is nonsensicle. Throughout mankind's history, wealth has ALWAYS be most heavily held in the hands of the old, those that have worked the longest to earn it. There is no doubt that recent generations have grown up in an increasingly PC world where they are under the illusion that they can achieve that in half the time (some smart ones will) but for the majority, only time will resolve it for you. And I have no doubt that this new generation will be richer than their parents - some new technology or advancement will create wealth from areas that are not today imagined.

The redeeming feature for you is that we're giving you a fair bit more earlier in life (wedding, house deposits, paid off student loans), and what is left will eventually go 100% to you. The bad news, most of us don't plan to do that until you're at least 75-80.  Please keep the medical standards advancing.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…