Boomer Debt

This week there was an article doing the rounds showing how older Canadians are still piling on debt. One economist went so far as to describe the behavior as being "punch-drunk" on debt.

The Globe And Mail followed that up by claiming Really, an increase in household debt isn't all bad. This response, I think, is more than a bit stupid.

Debt, fundamentally, is about trying to benefit today by bringing into today some of the value of future earnings. And like any tool, there are good uses and bad uses.

A good use would be paying for a university education, either for yourself or for your children. The net future value of that debt exceeds the carrying cost of that debt*.

A bad use of debt would be to bridge the gap between earnings and lifestyle. That is, accumulating debt to drive better cars, live in nicer houses, take nicer vacations, in such a way that there is no viable expectation that this debt can be discharged. And the evidence is that this, rather than investment debt, is the activity that the boomers are indulging in.

The Globe even falls into the boomer trap of wistfully noting:
Everything about the new generation now headed for the “retirement years” will be different from its predecessors – its family makeup, its aspirations (people aren’t as likely to downsize, especially with so many adult children returning home) and its tendency to keep borrowing.
To claim that "it is different this time" is a trap that so many people fall into again and again and again. Like the time it was different in the late '90s about the dot-com boom. Or the time that it was different in 2007 with low-pay or no-pay mortgages in the states. Or in 2012 in Canada where houses, already at historically unaffordable levels, "could only go up" in price. Or in 2014, where historically low interest rates could never possibly rise.

It is a fundamental law that what goes up must come down. The only exception to this rule are things which always go down, like the post-inflationary value of money. What gets borrowed must, at some point, be paid back -- which means you must have a plan at some point in the future for spending less than you make so that you can actually pay money back.
It’s risky to be punch-drunk, and many people are courting more than a bit of risk; but in risk is the possibility of growth.
Risk can be related to growth, but only if that risk is in an area where growth is even possible. To suggest that we should keep blindly borrowing and consumption-spending so that we can grow the economy is short-term stupid.


(*) == in general. A Masters degree in basket weaving may not be a long term net financial positive.


Calling Bob Rae the best option for the Liberal leadership is like saying Newt Gingrich is the best option for the Republican nomination -- frankly it's more a scathing condemnation of the alternatives than an actual positive endorsement.


Day 15231: Poor Judgement

...like driving. I made a bunch of stupid mistakes today, fortunately none of them had permanent consequences.


Living In The Future

Instead of white boards, we have these:

They look great -- especially the large one in the conference room -- but I find it takes a bit of getting used to, because the first few times your brain thinks you are going to write on the wall instead of a board that is five centimeters in front of it, and you crash the marker into it.


Poor Impulse Control

This is stupid, but I'm going to do it anyways: Hmmm.