Observations

I was at a party recently with people several years younger than me, and at one point in the evening the conversation moved to our parents' generation and the financial predicaments some of them are facing as they approach their retirement years. It was troubling to hear stories of real people who could be potentially facing a future that doesn't match the one promised to them by society at large, and it was fascinating that this discussion began at all given the age of the party goers. Issues included large amounts of debt, next to nothing saved or investments lost, and houses that have been leveraged to maintain a standard of living most Canadians consider to be typical.

Our parents are part of the baby boom generation and have lived through the most prosperous economic times in the history of the western world. Due to the implied social contract that exists, this generation, and generally any following it, fully expect a comfortable, well-to-do retirement that starts around the age of 60. 500,000 baby boomers will be entering this retirement age each year over the next decade or so, and many of these fully intend to tap into the equity of their real estate to fund their golden years in part or in whole. I think there's going to be a lot of disbelief and anger among this group of people for the failure of the social contract to hold up its end of the bargain. This isn't to say that our parents can be held blameless; they have their fair share of poor decisions made, albeit in the frame of a society that encouraged those kinds of choices.

Garth Turner, over at his blog www.greaterfool.ca, is convinced that the real estate market will tank, with the vagaries of regional circumstances affecting just how deep the asset deflation will end up being. Recent news certainly seems to support this viewpoint, and the wider perspective of macro economic performance in our nation and the world certainly cannot justify the meteoric rise of property value over the past decade. Canada, on average, is rated as one of the more unaffordable places to live and the size of our country and economy certainly can't be blamed for it. Rather, it seems speculation, cheap debt, and treating real estate as a primary investment source are the causes for the inflated prices we see now. The debt binge is over; it's hangover time.

I am by no means a financial guru, but I have learned quite a bit from the blogs I've been reading over the past year. It seems to me that having the ability to make smart decisions about wealth should be commonplace. I say that financial ignorance is intentional because people who are smart with their money generally make for very poor consumers. I count myself among those who have very little knowledge of investing, and even less hands-on experience. I have recently learned how to save significant amounts of my earnings, but my knowledge of what to do with my cash ends there. I'm curious why something like money management isn't included as part of a basic education. I'd like to ask my teacher friends about that.

A future where net energy is declining every day will only exacerbate the predicament our parents face as they head into their retirement years. My guess is many of them will have to continue working in some form for far longer than they'd like. It's an ongoing trend in the U.S. where the majority of the jobs created since 2008 have been part time, and the employees are 55+ years of age. I imagine a very similar situation will occur here as well. I also foresee multi-generational homes becoming a common feature as our aging parents seek help that the government will no longer be able to afford due to decreasing surpluses, and because our generation will be one of the first to face widespread downward mobility. Yes, home prices will be depreciating over the next six to ten years, but in parallel with that we will see deflating wages and inflating prices on staple goods and services. It's going to be rough for all involved!

Completely unrelated to the topic of the post, I should note here that I've postponed my cross-country volunteering adventure until September. My time will be spent preparing for my journey and enjoying the company of family and friends. Next week I'll get into more detail about the skills and connections I'm developing before leaving.