I had a training session that I was able to finish 30 minutes early, as the people I was training went through faster than I expected. That sounds pretty early, but it was a seven hour session. It is hard to time such long sessions, especially when the proficiency of participants is somewhat unknown and there is no way to predict what questions or complications will arise as the day progresses. Today it was nice, both participants from the same company were knowledgeable, engaged and willing to share screens and discuss a lot together, making the day far more interesting for me than having to lecture into the void.
It also meant that we could have some random conversations and both of them are looking at buying flats in or near London - or wherever they can afford. The problem is, they are both priced out of the market, as even if they can manage to get the deposit collected, they can't get the loan size as they don't earn enough to satisfy the banks. While I don't know what they each earn, they are both professionals and while young, shouldn't really have this much issue.
I was reading about the real estate situation in Australia, which keeps hitting new highs, but the people who can actually afford a house are decreasing, since the younger generations just can't get in. However, there are people at the other end of the scale that are buying investment properties. What is going to be interesting is that in time, the people with multiple apartments will eventually start kicking the bucket and if they do happen to have children to inherit them, the children are likely to offload them to cover their lifestyles.
Back at the GFC in 2008 and the next few years, there were complaints about "Russians buying all the summer cottages" without the factoring in of "Finns selling all of the summer cottages". There were media stories about how people were doing it tough and that is why they were selling, but this was only part of the story, as during that time, there was no decrease in the sale of luxury car brands.
What people were doing were selling their inheritances in order to keep their level of consumption. This is living now on the wealth generated in the past, but without replenishing that stock, the well will run dry. Finland never fully recovered from that recession and instead maintained lifestyle by increasing debt.
This is the 10 year chart on household debt in relation to GDP:
This is the 25 Year chart:
And the max available:
That means that debt against GDP has more than tripled since the 70s. But, what is interesting is that after the recession of the late 80s and early 90s, it was effectively reined in and almost halved, maybe as people suffered through and remembered tough times. It seems that the GFC from 2008 hardly made a blip on peoples debt extension pathways. And looking at the three year chart:
It looks like the trend is going to continue.
Not only have households taken on more debt, governments are extending their debt enormously too, with budget extensions on what are already deficit positions blowing out even further. What is also incredible is that while debt is mounting, there are news stories of sharemarkets hitting highs. This is interesting as while households are narrowing the gap in the debt to GDP ratios, the companies invested into keep growing in value. As GDP is made up of all expenditures of households,, businesses and governments - it is incredible that in a period when governments are spending the most, the increase in household debt is still closing the gap. Whichever way it is looked at, things don't add up to a healthy economy and the "great reset" seems imminent.
With so many pieces of the economy positioned to collapse, what is going to stop freefall? How much exposure does a person have when most are not only living in debt, but their government is taking on more and their retirement funds are investing into a market bubble poised to burst? How much crypto is enough to insulate against what is coming? I don't have enough by a longshot and even if I did, what kind of world will we be living in when the average person and family loses near everything?
But, this is an economy and the wealth is pooling somewhere, as we have seen when it comes to the mega rich clubs, where the last year has seen the largest percentage gains on average possibly ever. Wealth attracts wealth, but this indicates that the reverse is true and I think many of us already no this.
Debt attracts debt.
It has to be this way as wealth attracts wealth because it can be invested to passively earn, but that earning has to come from somewhere, which is often from the interest on debt and with debt increasing rapidly, those who are profiting from it will gain accordingly, while the indebted go in the other direction. Now, the governments have decided to increase the speed of wealth attraction, by borrowing heavily on the future, indebting their citizens for life - and the lives of the generations to come.
I feel like there has been a paradigm shift where the wealthy have given up even trying to pretend that the economy can work and instead, it is wholesale take all you can get no matter what happens to those who can't get anything. It is going to get challenging out there, in here - and everywhere.
Taraz
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