Government Debt Problems
It seems to me that many levels of government around the world have gotten themselves into debt problems that are going to hurt investors. Mish has a post on Spain, which he says makes Greece looking small.
Canada had political leadership in the 80s, 90s and early 2000s to take on out debt issue and work to reverse it. When our debt problem became apparent, after Trudeau's era of slaughtering youth's opportunity, Canadians did not have much household debt compared to today.
A huge extra problem with the rising government debt is that household debt is also crippling. Indeed, because of the demographics of the baby boomers, the vast majority of them had price protection in their homes. Indeed, interest rates were stepped down from the time many became home owners so many had price declines in housing through refinancing.
I am at the divide line between baby boomer and generation X. With my generation there were not enough of the secure jobs with excellent pension and benefits and regularly increasing pay. I have only had that since I moved north. We also got hit with much higher housing costs relative to unstable wages. Prior to coming north my wages were like a yo-yo, up and down. I had years where I saw 20-30% less wages then the prior year.
Governments are facing these huge debt problems when workers are increasingly facing the type of employment market that I have known and who also have larger levels of household debt.
I am of the opinion that the Canadian economy kind of limped along because a significant portion of people had little or no disposible income and tended to see a large majority of household income going to taxes and housing. I used to always say that if people spent the way we did the economy would grind to a halt, and we were supposed to be the double-income-no-kids-have-it-all lifestyle.
It seems to me that this round of government debt is going to cripple economies for at least a generation, but I don't think the market has caught on yet.
And then, the aging population, who have been financing this mess with their retirement funds, are not going to continue to save as their incomes decline. The generation stuggling with the unstable employment market and high housing costs simply does not have the disposible income to put aside. Wages relative to the cost of living is simply down and the generation dealing with this is much more concerned about how to replace an aging vehicle needed for today rather then retirement way off in the future. If today's needs are a struggle to meet, future needs simply lose importance.