Let’s indenture our children!

The modern economic and political machinery that we have in place is great, isn’t it? It allows us to contemplate actions and arrangements that would have been impossible a few short generations ago. In particular, we are now in the fortunate position of being able to gradually, gently, kindly indenture our children. That means that we commit them to a life of servitude and economic obediance. All completely legally, and in such a subtle fashion that they may only be dimly aware of it.

This happy arrangement ensures that the generous life styles that we have voted upon ourselves can continue well into our long and satisfying retirement years; that we can look forward to an efficient health care system oriented towards our greying needs; and that eventually our children can pass on the ever increasing cumulative burden of debt that our parents started, onto our grandkids.

We have now several highly effective strategies to ensure our offsprings’ indebtedness. The first idea is both simple and foolproof, and revolves around the key idea of government bonds and debt. We borrow money from rich people to fund the development of our life styles, and promise to pay those rich people back at a higher rate of return than they otherwise would get. That way we get to party now, guarantee ourselves generous pensions once we retire, and ensure a lavish health care system is in place once we start to get decrepit. And the remarkable beauty is: we don’t have to pay for it — our children will! And of course the rich people are happy too, as they get even richer from the scheme.

This would be not such a clever idea if it was done on an individual basis, since it is hard to get your children to agree to taking on the personal debts that you have accumulated over a lifetime. Instead, we would find ourselves after some years paying through the nose for indulgences past. But when we do this at a societal level, we get to stretch the life of these bond debts out from our generation to the next one, and crucially we can just issue more bonds to service the debts from our old ones! So we never actually have to pay the piper, but just get to pass the increasing mess on to our kids.

The other very cool strategy that is now in place worldwide is to jack up the price of real estate everywhere, so that young people have to enslave themselves to purchase a place to live. We do this by first of all crucially restricting supply: governments have careful “zoning laws” in place that ensure that empty land, even if it is in abundance, can not be accessed for housing. We also ensure that ever more and more people are squeezed into a few mega-cities, where the obvious restrictions on land availability ensure that prices will ever only go upwards. And we orient the tax structures to favour “investors” (i.e. older people) to allow them to speculate advantageously, ensuring that young people who actually want to live in houses or flats to raise families have to juggle two jobs a piece to manage it.

And finally we count on pliant governments to maintain our interests, so that if anything comes along to threaten our real estate bubbles, they quickly enact first home buyers loans, or reductions on stamp duty etc to heat up flagging demand and keep prices on the move upwards. Every government knows that whoever is in power when the bubble breaks will be in the electoral wilderness for a generation afterwards, such is the power of our greying voting bloc.

The tax system and superannuation laws are set up to advantage senior citizens. Younger people pay for older people’s retirement. This used to be, in agrarian times, a societal convention that was more or less understood: grandma and grandpa were given a room at the back of the house, made sure to be given enough food, and were tended when sick. Now we have managed to hardwire something rather more insidious into the system: we want our original residences with all their accumulated junk into extreme old age, we want mobile health care as well as dialysis machines, we want travel reductions for the elderly, we want a good range of senior cruises and holidays, and we want tax breaks at every opportunity.

Then there’s university or college education. That used to be free, or almost free, when the baby boomers were going through the system. But now we have decided that students need to pay for a good part of their higher education, and clearly we can just keep jacking up the prices, forcing them into greater and greater debt before they have even landed their first jobs. Someone has to pay for my retirement, and why should it be me?

Increasingly young people are starting to wake up to the shoddy deal that we have dealt them. But there is little use in complaining, since with a demographic as large as us baby boomers, democracy is on our side. Our children can console themselves by the realization that in the fullness of time, they too can pass on the accumulated debts to their children, and by the possibility that when we pass on, the family house will go to them—at least whatever is left of it after the reverse mortgage we took out to finance that half year in Tuscany.

Australia is one of the world’s most economically advantaged countries, with 25 years of continued “economic growth”. And we have a mountain of debt, both public (government of different levels), business and private (all those expensive homes). Have a look at the Australian Debt Clock at http://www.australiandebtclock.com.au/. The estimate is a total of about 6 trillion AUS$ of debt, which works out to every man woman and child owing, on average, around

$ (6 x 10^12) / (25 x 10^6) = $ 24 x 10^4 =$ 240,000.

That includes, of course, those young children just coming into the world. But of course the pain is not spread equally, since a lot of people (often rich retirees) hold a good amount of that debt, and so benefit from the larger problem afflicting our society as a whole.

It is a sad situation. Perhaps we will see the day when kids are automatically born into slavery, to look forward to a life of working their way out of it. Perhaps that day is already here?

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