'Old' has gotten preference over 'new' - The Daily Reckoning

'Old' has gotten preference over 'new'

May 20, 2015

- By Bill Bonner

Bill Bonner
Medellin, Colombia

Dear Diary,

"This city is great. It's beautiful. It's cheap. The climate is agreeable. And it's becoming a haven for internet savvy marketers. I think they're coming partly because it's a great place to live. And I think young people want to get away from the US too. It's just not the land of opportunity that it used to be."

So saith our dinner companion last night. He was the second young man in the last 24 hours to make the case that Medellin is a 'buy.'

"It just seems to be catching on with people who work on the internet. I guess because it is such a nice place to live. People are helpful and nice here. And everything is unbelievably cheap. "

We can back him up on both points: our taxi driver went far out of his way to help us find our hotel (we had the wrong name). Then, after driving us around for a half an hour, he was delighted to take the equivalent of $8 for the fare.

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Meanwhile, several readers have commented on last week's theme
    Billie Boy, I don't like where your head is lately. Your writing depicts our debt situation as being caused by baby boomers when it is the Fed and the government who never listen or do what the public desires...
Here's another:
    You are beginning to sound like Obuma in his class warfare dialogue. I am one of those old people who is not benefiting from the greed and lack of morals evident on Wall Street and in particular in Washington, DC. Leave me out of it and do not blame all old people for the actions of the elites in DC and state governments...
To clarify, we are not blaming innocent beneficiaries nor innocent victims. And we admit that we couldn't get a conviction for willful larceny; most of the people involved did so unwittingly. They were just playing the piano; how could they know what was going on in the back room?

Few of us baby boomers exercised much direct influence on public policy. And yet, most voted...and their elected representatives put in place a corrupt system that favors old people and old businesses at the expense of young ones.

Everyone knows that the wealth gains of the 'recovery' period have gone exclusively to the 'rich.' That those people are also old is more than a coincidence. Large political donors are old. The politicians themselves are old. The voters are old. The special interests are old. Media owners are old. The whole system is old.

Over time, people find ways to game the system - any system - to get more of what they want with less risk and less effort. They use the government - the only institution that can force people to do its bidding - to help them.

According to a study we cited last week, regulations have taken about 2% per year off US GDP for the last half century. Had the rules remained as free and easy as they were when we were born, the typical young person today would enter an economy three times as big as it currently is.

Another study cited by Marc Faber tells us that those regulations seem to be working. "The business sector of the United States...appears to be getting 'old and fat,'" says the Brookings Institution. Entrenched businesses have been able to raise the ramparts even higher!

The business sector is getting old and fat because it has managed to stifle competition and stop the process of 'creative destruction.' In 1992, the share of US firms older than 16 years was 23%. Twenty years later it was 34%. So did the share of private sector workers employed in these old businesses increase from 60% to 72%. Employment in younger firms declined.

The number of new firms went down. And the number of jobs went down too...with the only increase being of old people working in old firms.

Old businesses get loans, bailouts, revenues and profits. Old people get jobs, pills and medical services. They get Social Security benefits too. And when they leave this vale of tears, they also leave behind them more than $200 trillion of public sector bills to pay - in the US alone.

Young people have been "disinherited," says the Manhattan Institute:

    Burdened with an obligation to pay government debt they did not incur, young Americans - those born between the early 1980s and the beginning of the 21stcentury, or millennials ....

    This is the first generation of young Americans that our government systemically disfavors and the first generation whose prospects are lower than those of their parents.

Disinherited? That suggests they start out even. But their parents and grandparents have put them in the hole.

Robbed? Cheated? Scammed? Flimflammed? Rolled?.

Take your pick.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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