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The Bank of England on Generational Inequality

Discussion in 'Property Market Economics' started by Graeme, 19th Sep, 2015.

  1. Graeme

    Graeme Well-Known Member

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    I found an interesting article entitled "The Bank of England adds some dynamite to the war of the generations" through a link on the FT Alphaville blog.

    This in turn references a post on the Bank Underground blog on the dynamics of debt back in the UK.

    OK, that's a bit of reading. But the basic argument is that they've got proof that higher property values are being paid for through rising debt levels on the young. For example, this chart shows borrowings versus age.

    [​IMG]

    OK, the thesis strikes me as being bleeding obvious, after all, someone has to fun the equity fairy. But the above demonstrates that those born in the seventies or eighties are ramping up debt at a relatively faster rate than those in born in the sixties or before. Hence it's the oft-discussed generational transfer of wealth.

    I think that they're missing a second factor, which is investors. They're a pretty major factor in a lot of markets these days. It'd be interesting for the Bank of England to rework the figures with them included. I don't know how relevant it'd be to Australia, as property investment seems more mainstream here, but it might give a hint of the dynamics.
     
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  2. Bayview

    Bayview Well-Known Member

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    Maybe it already includes investors.

    We only think there are lots of investors because we are investors ourselves, and tend to notice them more.

    Sorta like buying a different car - once you have one, you see them everywhere.

    It doesn't mention what type of debt?

    Folks from the 60's and earlier had very little car and CC debt. Nowadays it is almost a given.
     
  3. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Pluck the fruits gentlemen, pluck the fruits.

    I'm more interested to understand how to pluck faster, than worry about what is the cause of my beautiful fruits. The young generation have ample ability and opportunity to join the the ranks if they wish. Just my opinion.
     
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    I smell victimology all over this : (

    Once one takes part in this context, the law of expectancy will deliver exactly what one expects

    ta

    rof
     
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  5. Leo2413

    Leo2413 Well-Known Member Premium Member

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    100% true. And yet such a massive segment of society take an on-going part in , to coin your term, 'victimology'.

    Personally, I believe it is a huge, huge price they are paying and will pay for this.
     
    Last edited: 23rd Sep, 2015