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April 30th, 2008

RESTLESS MISCREANT: THE GREAT BOOMER BUST

by Delbert Grady

Well, Mr. Boomer, you’ve always gotten your way from the moment you were born. And there were so many of you that everyone else had to suffer your collective arrogance, from flower power to McMansions. Since you’ve never had a serious financial reversal (until now), you fully expected to sell your monstrously over-sized house with the Kohler Pharaoh’s sinks and granite countertops to retire with a millionaire’s lifestyle on a golf course somewhere, in some brave new world free of the long-term realities of economics, entitlements and what is now just an over-the-hill population group soon to be no longer able to create wealth for itself. Welcome to the machine.

The jig is up. The reality of our runaway and financially corrupt economy has finally been exposed for what it is. Regular readers of my column may recall “Guns, Butter and Pizza” from the Spring 2006 issue, in which I dubbed the then-coming financial mess as “The New Weimar Republic,” a scenario envisioning severe asset deflation coupled with currency-flooding, resulting in hyperinflation for necessities.Well, it’s two years later and you can now certainly feel the hand of death upon the dollar.After all, we’re essentially at “late empire” stage when fast money corrupts absolutely, just like power. In any event, your $50 pizza is on its way.

For years, the Treasury and Federal Reserve have collaborated to try to effectively repeal the business cycle, progressively making the underlying situation ever more dangerous by financing bubble upon bubble. It is now obvious that they will stop at nothing to keep the rotten mess going, fearing economic cataclysm if they don’t. And through that vain effort, the dollar will continue to be compromised while they hope their efforts to re-liquify bank, broker and hedge fund exposures will keep the lid on and avoid a very overdue meltdown. Merchant recipients of ever-declining dollars (read foreigners) will therefore raise prices to compensate and protect their margins.

But in the meantime, Mr. Boomer, your McMansion is probably worth less than you paid for it, it costs a fortune to run, it’s value is declining by the minute and there’s nobody around able or stupid enough to take on your folly. If you can afford to keep it, you’ll deplete your retirement fund and have to cut back on your general spending, thereby adding to the already obvious economic malaise. Of course, you can always walk away like so many others, leaving your mess for someone else to clean up (Tip to stable home/condo owners: you are going to increasingly pick up the expenses no longer being paid by such people through increased taxes/common charges).And to top it all off, you’ll probably lose your job and pension just as your 401k becomes toast in an extended general stock market collapse. But don’t worry–things could always be worse.

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