We have not been timid about pleading the old man’s case. He has spent a lifetime learning how things work, and now, he is ignored. He has committed the seven deadly sins…the classic ones, and a few more he invented. He has seen the result, but does any young whippersnapper ask his advice? No. Every callow sprig wants to make the same errors. Gluttony…avarice…pride. He feels he has a right to them. He envies those richer than himself, and covets his neighbor’s wife…as well as his new BMW. "There is no use telling him anything," says the geezer to himself, "He won’t listen."
How many times has the old man burned his fingers? He is not twice shy, but four or eight times shy. There’s a lesson in there worth knowing, but the young man next door sticks his fingers into every socket, stove, and toaster-oven he can find. So has the old farmer reaped as he sowed; he could tell the young a thing about planting things: "You gotta be careful about what you put in the ground," he says to himself. But who asks?
And so, the old investor did u2018buy high’ on more than one occasion. "No, that’s not the way to do it!" He is dying for the opportunity to tell someone. "The way to do it is to buy low, then sell high." Still, his sons and daughters buy Google at more than 50 times earnings, and are proud of themselves for doing it.
We have made the point before. The old are ignored. The dead are buried. No stockbrokers ask for their custom. No pollsters ask their opinions. No politicians are so desperate for votes that they plead for them in cemeteries. More’s the pity, but that’s just the way things are. Each generation has to learn its essential lessons the hard way.
What must bother the dead more than being ignored is the ingratitude of the living. The hard lessons were passed along as an heirloom, but instead of displaying them on the mantle, along with photos of the departed ancestors, they were shoved into a forgotten drawer. They were not even admired, let alone honored. What get put on display are the family silver, the wealth, and the patrimony that one generation leaves to another. You’d think the living would at least be grateful for that.
But no, they hardly notice.
They take six thousand years of accumulated progress and wealth for granted, as if they had figured it all out for themselves. Granted, the present generation invented the Internet, but only because generations in front of them had figured out how to generate electricity, rig up phone lines, work copper and plastics – and a million other things. As Sir Isaac Newton put it, he was able to see things that others had not, because, "he stood on the shoulders of giants," who came before him. And yet, the living act as though they had not only created the whole thing from scratch, but invented sex, too!
But we write today neither to blame the quick, nor to thank the dead. Instead, we write on behalf of a group that is neither quick nor dead: the group that has not yet been born yet. Today’s leading generation not only ignores the stiffs that came before it; it stiffs the larval generations to follow.
In a letter to James Madison, Thomas Jefferson asked how, "one generation of men has a right to bind another." He concluded by saying, "No generation can contract debts greater than may be paid during the course of its own existence."
But contracting debts greater than may be paid during the course of its own existence is precisely what Americans are doing. In fact, they are contracting debts that increase over the course of their own lifetimes.
George W. Bush will go down in history not as a great war president, we recall predicting earlier this week, but as the greatest debt-beat president the country has ever had. In his few years in office, the feds have borrowed more than $1.05 trillion from foreign governments and banks. This is more than all the rest of the nation’s administrations put together, from 1776 to 2000.
Last month, the U.S. national debt passed the $8 trillion mark. This year’s budget deficit alone added $319 billion to the country’s obligations. According to the feds themselves, deficits will rise to $873 billion per year within 10 years. Two years more and they will be at $1 trillion per year, with a national debt edging up to $20 trillion. By 2017, annual deficits are supposed to reach $2 trillion per year.
These figures are not just guesses. They’re projections based on boondoggle laws already on the books.
According to the Bush-friendly Heritage Foundation, federal deficits are expected to rise to $1 trillion per year, by the year 2017, with a $16 trillion national debt, twice today’s level. After that, deficits should grow to $2 trillion per year,
Public debt is a remarkable thing. Through generation after generation, over thousands of years, each one usually left the world a little bit better off than it found it. More land was placed under cultivation; more animals were tamed and corralled; more houses were built; more factories were put up.
Occasionally empire builders, adventurers, or natural calamities set things into reverse. After the collapse of the Third Reich, for example, Germans found themselves with a pile of rubble and armed occupying troops on every street corner. Still, the little Kraut born in Dusseldorf in 1945 entered the world almost completely free of debt! He could rebuild, and enjoy the fruits of his own industry.
Today, the child born in America practically has an electronic ankle tag put on him immediately. He’s got his share of about $50 trillion in obligations to pay; they need to make sure he doesn’t get away. As far as we can tell, no other generation in history has ever been burdened to such an extent with the expenses of its parents.
Even in the private sector the u2018get it while you can’ attitude crushes the next generation. In the third quarter of 2005 alone, Paul Kasriel of Northern Trust reports, U.S. households spent $531 billion more than their after-tax earnings. About half of that money came from "equity extraction." In other words, the present generation is selling off its houses one room at a time. By the time the tadpoles come of age, there will be nothing left.
Consumer spending has risen to 76% of the economy; before 2000, it was only two-thirds. The savings rate has fallen to less than 2%. Student loans outstanding have risen more than 800% since Ronald Reagan took office. Mortgages are up nearly 900%. Credit card debt is up more than 500%.
"America’s debt will not be paid by those currently working, nor even by those currently breathing. It will be pushed on to the next generation…and the next. One generation consumes, the other pays. What the first enjoys as a blessing comes to the next as a curse."
It doesn’t seem fair.
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.