I’m currently reading John Kay’s book Other People’s Money: The Real Business of Finance. So far it has been great, even if a little dense and slow going. I found these paragraphs particularly good:
The individualistic ethos of the era of financialisation has affected wealth transfer over time in other ways. The American economist Laurence Kotlikoff created the concept of ‘intergenerational accounting’ to describe the government’s transfer of wealth over time. 15 The journalist Tom Brokaw coined the phrase ‘the greatest generation’ to describe my parents and their contemporaries, who grew up during the Great Depression, fought in the Second World War and (in Europe) suffered privation in its aftermath. 16 Another author might term my generation of ‘baby boomers’, ‘the luckiest generation’ or perhaps just ‘the most selfish generation’. We have not only been successful— and perhaps this is to our credit— in enjoying a time without major armed conflict or deep economic depression; we have also been effective in transferring wealth from both past and future generations to ourselves.
We reduced the debt we owed to our predecessors by rapid inflation. We promised ourselves generous state and occupational pensions, and then argued that the burden of providing them for subsequent generations could not be afforded. We sold assets that had been accumulated in the past, and would yield prospective benefits in the future, for our own current benefit, privatising state industries and monetising the goodwill in Goldman Sachs and Halifax Building Society. We let house prices and share prices rise to new highs in real terms, forcing our children to buy the nation’s assets from us at prices much higher than those we had ourselves paid. To add insult to injury, we seem to have been inadequately mindful of the national infrastructure: enjoying shopping malls, to be sure, but building few houses and allowing the transport system to decay.
The John Kay of the 1980s, transported twenty-five years forward in time, would not be able to afford to buy the house I still live in, would have incurred substantial debt in higher education, would have to make greater provision for his own retirement and would look ahead to a tax burden inevitably rising to meet the costs of an increasingly adverse demography. When Jeff Skilling toasted the capitalisation of energy contracts in champagne, he was celebrating the twin benefits of the prudence of his predecessors and his own imprudence in relation to his successors. And I could join him in that toast. Lucky indeed to have lived through the era of financialisation. (Kindle Locations 4541-4560)
Thanks mom and dad! Hope that champagne tasted good at least.