There's been some discussion in our Guest Book recently about the banking crisis and the reasons why we're all in such a bloody mess. It's pretty hard for ordinary Grumpy Folk to understand, but a book review in this week's Sunday Times Culture section may hold a clue.
The book is called “Boomerang”. It's by Michael Lewis, and the review from which we offer the following quotes was by Robert Harris ...
Last year when flights across Europe were grounded by the Icelandic volcano, my wife found herself trapped with our two younger children in a hotel on Tenerife. The place wasn't cheap; she had assumed the guests around her were relatively well-off. But when news spread that the wouldn't be leaving any time soon, the illusion collapsed. The family at the next table began sharing a single bowl of spaghetti at lunch; others couldn't afford to book themselves a new flight until the refund for the old one was cleared by their credit card company; a few were even anxious about being able to pay the extra charges they were incurring at the long-term car park back in the UK. As Michael Lewis puts it: “Leverage buys you a glimpse of a prosperity you haven't earned”.
How true. We've been saying for ages here at GOS that ordinary people's expectations have become perfectly unrealistic. The plasterer with a wife and three kids expects to own a lovely four-bedroom house with a jacuzzi in the garden and a four-by-four and a Beamer in the drive, with three holidays in Florida each year – but that's loopy. It would be lovely, but it's loopy: there has never been a time when the average working man's income can support a Hallo! Magazine lifestyle and it's foolish to expect it.
Back to the review ...
The ability to defer gratification is regarded in Freudian psychoanalysis as a sign of maturity. Unfortunately the western baby-boomer generation is perhaps the most immature there has ever been. It is our collective quest to live the dream right now – whether on individual creadit cards or as part of a society in which “future revenue streams” have been “securitised” - that has brought us to our present pass.
Yes. Though we're puzzled by the illusion to baby-boomers. Aren't we the baby-boomers, those of us born and brought up in the post-war years? We were the people for whom the system worked, and worked well: we spent most of our lives in secure employment, our standard of living rose and rose, we took out modest mortgages and then paid them off, we entered the world of car-ownership, we built up a decent pension pot ... and we didn't need to put ourselves in hock to do it.
Trouble is, the following generation – sometimes called the “Echo baby boomers” of 1982 – 1995 – wanted the same stuff, but have found themselves operating in a less secure environment. They can no longer rely on jobs for life, the cost of their pensions has rocketed and can no longer be borne, and while inflation may have been within reasonable limits, there are two OTHER kinds of inflation which have hit our society very hard. One is property inflation: a house is no longer something to live in, but an investment, something that everyone has to have because renting is for losers, something to be improved and sold on, the stuff of silly television programmes for idle women during their lonely days. When The GOS and Mrs.GOS were first married, a nice three-bed semi in London cost £6,000. Now it would be one hundred times that. How's that for inflation?
The other inflation is the inflation of expectation. In those balmy days of the early Grumpy Marriage, it never occurred to Mr. and Mrs.GOS to fly to Florida or the Seychelles for their hols. A camping holiday in Wales or a rented cottage in Brittany was adventure enough. And cars – the Grumpy Austin Allegro cost £1200 in 1974. It was a dreadful car by modern standards. A similarly-sized small family saloon today – a Ford Focus, for instance – is bigger, faster, safer, more comfortable, more economical, and has far more mod cons. Of course, we all want these benefits. We might even feel we have a right to drive a car that is economical and safe. But it costs ten times as much, a full 20% more than “ordinary” inflation since 1974.
Not that our children of the “Echo baby boom” will accept all that. No, they blame us – there is even a well-known book available by politician David Willetts, called “The Pinch: How the Baby Boomers Took Their Children's Future”. We hope he isn't going to expect any of our votes at the next election. We didn't “take” anything. We paid for what we got, in full, out of our salaries. Our kids should do the same. “Wanker Willetts” - how apt.
Back to the book again. Michael reserves his greatest ire for the good people of Greece. Well, the Greeks, anyway ...
Here is a country where the railway system costs €700m a year to run, earns revenues of €100m, and the average salary is €65,000; where “the first thing a government does in an election year is to pull the tax collectors off the streets”; where if the tax laws were enforced “every doctor in Greece would be in jail”.
“In Greece the money was borrowed by the state: the debts are the debts of the Greek people, but the people want no part of them. The Greeks already have taken to the streets, violently, and have been quick to find people outside of Greece to blame for their problems”.
Goldman Sachs are reported to have been paid fees of $300m for “a series of apparently legal but nonetheless repellent deals designed to hide the Greek government's true level of indebtedness” - a concealment that enabled Greece to join the euro and gain access to long-term borrowing at one-third the levels they would otherwise have been charged. “The investment bankers taught the Greek government how to securitise future receipts from the national lottery, highway tolls, airport landing fees and even funds granted to the country by the EU. Any future stream of income that could be identified was sold for cash up front and spent”.
All in all, Lewis's book sounds like a good and illuminating read. The GOS has already ordered his copy, and you can get yours here. We think the one prediction we can make in these uncertain times, though, is that reading it won't actually make you any happier.
either on this site or on the World Wide Web.
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