Well, my ole’wise bird, seems a wee smitten of ole testament wisdom should not come as a shock to any historians in our midst. Scarcely in our 3,000 years of shared thought on this planet has there been a generation, let alone two and the onset of a third, where the wisdom of our forebears has been so forsaken as today.
Seems a case can be made that “THE CHANGE” took place around the onset of the BBoomers some 6 to 7 decades ago. “THE CHANGE” was occurred at the end of WWII, which left the 3 swords of Damocles hanging over the heads of those who were about to manifest in body on this planet. The “3 swords “, the threats of (i) nuclear wipe out, (ii) overpopulation and (iii) pollution, were a cosmic threat destined to wipe out our planet. It is this 3-fold cosmic threat that provided the backdrop for all post-war newly borns and consequently separated them, and their value systems, from all that had gone on before, including much of the revered wisdom in the book of Job, or greater still, the old and new testaments. For the 1st time in history, those borne onto this planet, were raised in an awareness that the whole planet could die at one time, were “Limits of Growth” given short shrift.
Out of “THE CHANGE”, came the body of new philosophy that we are not here for a long time but a good time, live for the moment, a mantra that permeated the 60’s drug culture and rewarded anti-establishment behaviour thereafter in education, music, thought and, you guessed it, economics where increasingly, this shortened time horizon began to permeate financial statements. The need to show profit in the short term precluded the need for saner, wiser and longer term decision making.
Seems, at the same time, the “OLE RED DRAGON” (ORD) was actively acting behind the scenes in setting up “THE CHANGE” generations for the “GREAT FALL”. He concocted his plan to prolong the “WISDOM VOID” that accompanied “THE CHANGE” for as long as possible, thus exaggerating “THE FALL” when it finally occurred.
Underlying his plan was his belief that the majority would not rebel as long as their basic comforts were in place and thus was hatched his plan which would take all of 6 decades to unravel.
His primary (and favourite) tool would be the real estate market.
Housing would be made available to all BBoomers in a low interest rate environment, thus creating pricing demand and pricing increments as the BBoomers came on stream. ORD underestimated the ingenuity of “THE CHANGE” generation when they were able to survive his 1st assault, the early ‘80’s interest rate runup. Reagonomics proved just too difficult a foe. ORG had however accomplished a high comfort level as BBoomers now had equity in their homes, and as such, high comfort, but with the downside that homes were now too expensive for one income families. The DINKS, “double-income-no kids” filled this gap nicely and again created pricing demand and pricing increments as married couples put off having children in order to own real estate.
By this time, real estate values had grown 10 times what they were in the 70’s the year the BBoomers began their real estate purchasing. Boomers and DINKS alike were basking in their equity comfort and, all too often utilising this equity for their hot cars, expensive lifestyles and cottages which were now taken for granted.
Just one problem, though. With so many financed to the hilt, how was ORD to prop up the real estate market?
Again, somewhat ingeniously, ORD appealed to the greed of the mortgage brokers by enticing them to provide funds (albeit at a price) at the margin to buy real estate, thus propping up the market. The appealing rationale was to offer low one year payment terms as, by the end of the year, the marginal purchaser would have enough equity to refinance.
In all, as mentioned earlier, ORD’s devious plan upheld the false sense of comfort for “THE CHANGE” generations while sucking all buying power out of the real estate market, not to mention, the scourging of the wisdom literature.
That is until the recent debacle. Just no more demand levers! No more BBoomers, many of whom are leveraged on their equity to the hilt, no more DINKS and not much longer for low interest rates. Ah yes, we hear of the plan to rewrite mortgages so people can stay in their homes, but alas, it would seem that ORD is about to have his way.
Real estate demand has begun to wane, equity is disappearing at an alarming rate, those gazillions of high yielding mortgage investment vehicles aren’t worth the paper they are written on and the $62 trillion in related credit debt swaps are about to make the pre-CHANGE tulip bulb inflation look reasonable.
Seems to me the immutable laws, camouflaged by comfort for the past 6 decades, are about to reassert.
I’m guessing we’ll need a heavy dose of “the patience of JOB” before the play that ORG has written runs its course.
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