Family Attitudes and the Global Economic Crisis

Within the traditional family unit, an ancient concept in itself (but one that I rather like), members of the family had definite roles to play: the children were to be seen but not heard, the wife was a mother and homemaker, the father the breadwinner and provider and the elderly relations were there to be grumpy and complain about everything.

I have reached the age where I fit rather neatly into that last role......

Of course, that traditional picture has changed beyond any recognition now and not only because it (sadly) now seems to be old fashioned to promote the “traditional family” as a good and necessary thing for many people. The model of having one breadwinner and a “homemaker” is now impossible for many young families, as two incomes are needed to enable them to buy a home and live in the manner to which they would like to become accustomed. Children are encouraged to be more open and outgoing- and it is getting harder and harder for anyone (even parents) to bring necessary discipline without being accused of all manner of things. “Spare the rod, spoil the child” has become “touch that rod and you’ll go to prison for child abuse, your kids will be taken into care and social services will examine everything you and your wife have done since they were born”. If they grow up into criminals they will be deemed to have been “failed by the system” and the next government will announce yet more sweeping reforms to care, education, social services and the police. Shame they didn’t just let you spank them in the first place...

One of the biggest changes in this generation though, seems to be one of attitude. Many things that I grew up thinking were “privileges” now seem to have become “entitlements” in the eyes of most people.

One of the problems with the affordability of current lifestyles is the assumption by so many that they are “entitled” to own a nice home, have a good well paid job, have two holidays a year (at least one of which will be abroad), a decent car (complete with cheap petrol- yeh right), get compensation from somebody else for anything that goes wrong in their lives and to have whatever they want right now- without all that outdated rubbish about saving up or any of that stuff the older generation rattles on about.
Students all feel entitled to a University Education, at the best schools in the country, without having to pay more than a pittance for it. Public workers scream at the idea that their pensions may actually be limited by what is affordable or justified by their payments, rather than being tied to inflation and guaranteed forever. In this country many seem to think they are entitled to swear and abuse people in authority, throw stones at police during demonstrations, complain non-stop about politicians, councils or anyone else that sets rules they don’t like... and yet be able to run to these same people for help as soon as they need it and get it without question. And such is the quality of many who serve us in this way; they usually do get that help without reservations and without giving anybody a thank you. One thing I liked about New York was the respect in which police and emergency services are held and the appreciation voiced for the risks they take and the sacrifices they make. Where is that respect over here?

One result of this sense of “entitlement” is, of course, the current horrendous financial mess the Western World is in- and let’s be honest “horrendous financial mess” barely covers it. We all thought we could borrow as much as we liked, cheaply and when we liked and would never be called to account for it. A decade or more of booming economies, slack regulatory practises and political opportunism created a society in debt to a degree never seen before in history. Thousands of mortgages were taken out in the USA by people who couldn’t even afford to make the first payment- and who now are rushing to blame “the system” for allowing them to get into so much financial trouble. The system was, and is, deeply flawed, but whatever happened to personal responsibility for our own actions and situation?

In the USA, President Obama is at loggerheads with congress over the budget. He makes much out of having agreed to cuts of $33bn (actually the true cuts are less than that- some are just changes in definitions of spending) at a time when the projected deficit is $1.4 trillion. The conservative government in the UK is being lambasted for introducing swingeing cuts... which only reduce spending to where it was 2 years ago- some 6% of the total.

The truth behind all this is our governments and most others in Western Europe have, for many years, been spending money they do not have and cannot afford- and at some stage this has to stop. QE2, 3, 4 and so on, merely put off the evil day and make the final reckoning, when it comes, all the worse. They may be necessary, but are only valuable if the time it buys government is used to put in place lasting solutions to the problem- and there is no sign of that happening.

So what does all this mean for markets? Cheap money and absurdly low interest rates will continue to support them and the need for investors to get some kind of yield for their money will support corporate spreads and equities to a degree. NO need to get depressed (leave that to me, I’m way ahead of you) and sell up, there is no major slump coming in the near future, although we may see setbacks and bumps in the road. Longer term- we seem to be preaching the dangers of producing another asset bubble whilst carrying right on doing it- and we’ve found out how that can end. Property will continue to be a good place to live, but a lousy investment, for years to come in the USA and indeed in most of Europe I think. Retrenchment, deleveraging and austerity should become complimentary terms to apply to policy rather than complaints and it’s hard to make a strong case for buying dollars in the near future as European interest rates begin to rise.

I think I’ve forgotten what my point was when I started this comment- but at least I feel better for having got all that off my chest.

Have a Happy Wednesday, let’s all be careful out there...