2012 vs 1984: Young adults really do have it harder today

[Cowboy89]

Originally Posted by bizaro86

I doubt it. I'm significantly invested in real estate for a number of reasons, but I do think people do themselves a disservice when they think buying is the only choice. For many/most people home ownership will make sense at some point in their lives, but I get tired of my friends getting pressured into it too soon in their lives.

I agree. It's become too automatic for people to assume that buying is always the right answer for everyone with no attention paid to the external market conditions and their own situation. A new grad probably shouldn't buy real estate, so they can be more flexible in the labor market and so that they can buy with a real downpayment providing them with a margin of safety in case of real estate price declines or stagnation (20% not the customary 5% down with CMHC insurance).

I come off as extremely anti-buying. I'm not, I'm only for the alternative that fits one's life and financial situation best. With considerations with interest rates, rental costs, and house prices right now it points to renting. That doesn't preclude me from buying when it makes sense personally and in the right market conditions.

For example if I lived in many US makets I would be buying a house and it would most definately be the right move. In many US markets the price to rent ratio favors buying:

• interest rates are at all-time lows
• house prices are below the average mean inflation adjusted prices
• Due to many people losing their homes in the credit crisis, rents are actually more expensive monthly than a mortgage plus other costs on the same property in many cases (A lot of renters cannot buy because they can't qualify for a mortgage post 2008)
• You can actually take out a 30 year mortgage in the US and not have to renew every 5 years (Which means you can lock in your monthly interest payment for 30 years not 5!!!)
• In the US you can deduct the interest portion of your mortgage payment off your taxible income

[macker]

Originally Posted by bizaro86

You said in your first post that our economy was 75% consumption based like it was a bad thing. Now you're posting a link about food waste (which is terrible, of course).

I'm not sure I can follow the argument there. If we're wasting 25% of what we produce (which seems high, on average) wouldn't increasing the consumption of goods/services be a good thing?

I guess I don't follow your point.

It is a bad thing and not sustainable based on the laws of leverage it is not sustainable. Obviously not everything that is produced is consumed and a simple example was used to illustrate that point. Go look in a McDonalds dumpster if you don't believe me. People are using credit to buy junk food that they eat half of to deal with their stress that they are in debt. Like the junk food credit doesn't fill you up and won't satisfy in the long term. The system needs a major overhaul as it is too leveraged to consumption. How many drive throughs did you go through in 1984? How many in 2012. Simple example but don't want to consume much more time....waste....

[bizaro86]

Originally Posted by macker

It is a bad thing and not sustainable based on the laws of leverage it is not sustainable. Obviously not everything that is produced is consumed and a simple example was used to illustrate that point. Go look in a McDonalds dumpster if you don't believe me. People are using credit to buy junk food that they eat half of to deal with their stress that they are in debt. Like the junk food credit doesn't fill you up and won't satisfy in the long term. The system needs a major overhaul as it is too leveraged to consumption. How many drive throughs did you go through in 1984? How many in 2012. Simple example but don't want to consume much more time....waste....

So are you saying we should consume more or less? If we consumed more wouldn't our economy become more weighted to consumption?

The statistic you used about 75% of the economy being consumption is from the US, and isn't important anyway. When a car company buys all it's parts, that gets counted in GDP as a "business" expense. Then it sells you a car and that's a "consumption" expense. If the car company made all it's own parts, the ratio would go to 100% consumption and 0% business, but it wouldn't make any difference to the actual economy.

Everything that's made is for the purpose of it being consumed. Whether things are getting wasted has nothing to do with what percent of the economy is consumption. All of mcdonald's sales are counted as "consumption" even what gets thrown out.

[Traditional_Ale]

Originally Posted by Sliver

Since I'm not ######ed, yes I did consider that. If you don't know anybody that travels a lot and wants everything else at the expense of responsible financial management then good on you. To me, travel is the cherry on top of life that comes after RRSPs, RESPs, mortgage, VISA, and all other obligations are taken care of first. I know people who travel and have lived abroad on their line of credit. That's who I am referring to.

What if never plan to retire, have children, own property, or carry a balance on my VISA? What then?

[Lt.Spears]

If were talking about rental rates, most of the rentals i saw when looking at properties were from 1100-1900/ month.

With 10% down a mortgage fora similar property was about 1500-1700/month over 25 year amort.

Just made sense to buy.

[macker]

Originally Posted by bizaro86

So are you saying we should consume more or less? If we consumed more wouldn't our economy become more weighted to consumption?

The statistic you used about 75% of the economy being consumption is from the US, and isn't important anyway. When a car company buys all it's parts, that gets counted in GDP as a "business" expense. Then it sells you a car and that's a "consumption" expense. If the car company made all it's own parts, the ratio would go to 100% consumption and 0% business, but it wouldn't make any difference to the actual economy.

Everything that's made is for the purpose of it being consumed. Whether things are getting wasted has nothing to do with what percent of the economy is consumption. All of mcdonald's sales are counted as "consumption" even what gets thrown out.

Consume less and diversify the economy away from consumption based and more to production based. Canada is the 11th largest economy in the world but highly dependent on the US which obviously is number one and accounts for more than 50% of the world economy. US takes in 73% of Canadian exports so the US stat is relevant up the chain. If you look at either countries debt-to-income ratio some would say Canada is in basically the same situation and both countries need to become better savers like the Chinease/Japanese etc. I can see what you are saying from a corporate standpoint and we all benefit from this consumption in our jobs but this consumption has caused major issues in both economies noted in the household debt increasing at a rate that is twice that of disposable income since 2008-2009 (Bank of Canada). Keep consuming.....consumer debt hit an all-time high in Canada at $1.5 trillion and the debt-to-income ratio in Canada is also making new highs around 150% even though consumers ability to pay it back is not rising nearly as fast. I don't know what the ratio was in 1984 but someone will look it up but if you look at 2005 this ratio was at 116% to put things into perspective. These ratios do point out a structrual issue within the economy.

[Itse]

Originally Posted by blankall

I'm not sure how #2 is the "least likely" to make financial sense in the long term.

Option #3 is a huge huge risk. The restaurant/pub industry is probably the riskiest business you could find. They fold all the time. Plus, I'm guessing the amount of money you inherited wasn't huge (IE that much over 100k) based on the way you are talking about your options. The startup costs for a pub are going to be huge and you'll probably have to get a major business loan in addition to exhausting all the money you inherited.

You're overestimating the startup costs. It depends on what you're doing of course, but I was planning for a small thing. (I know a guy who has several places here in Helsinki check my math for me.)

As to pubs folding, that's something you have to accept when you get into the business. Spend accordingly and move on when your time has gone.

Really the pub thing folded because you have to pull crazy hours to start with and I really felt like spending more time with my kid now.

Maybe when I'm fifty or something

Honestly, I don't see how getting an education, especially if it's in an employable field is a risky option at all. Currently your qualified to drive taxis. How is diversifying your job qualification risky.

Basically, what I'm saying is, you've made a good choice. The only other choice I would have made is buying a property (but I may be in the minority on that one, based on this thread).

Statistically I'll propably end up as a teacher, a bureaucrat or a scholar. Considering I'll be around 40 when (and if) I graduate, it's very unlikely that I'll get to the what qualifies for good money in any of those fields. All have starting salaries that are less than what I was making as a cabbie. (Although you have to do less hours for the same money.) And all of those fields put together have less openings at any given time than what the demand for cabbies is in Helsinki. Especially good ones. You can make really decent money if you're good cabbie, and I am/was.

Especially when you consider the fact that I'm eating away my money instead of investing them for those university years, the chances of me making up for those "lost" years is about nonexistant.

Basically I'm spending money so I get to study something I'm truly interested in and so I can have a life outside of my job, which was difficult while driving. Those are absolutely things worth spending money on, but it's not really an investment.

Hypothetically speaking though this might be end up being the difference between my wife ever finishing her thesis, which would make a huge difference in her salary and job options.

[bizaro86]

Originally Posted by macker

Consume less and diversify the economy away from consumption based and more to production based.

What do you plan to have society do with a bunch of goods that we produce but we don't intend to consume?

[GGG]

Originally Posted by bizaro86

Someone just graduating now can't exactly go back to 2003 and buy a house then. A new university grad this may would have been ~12-15 years old in 2003, which would have made getting a mortgage pretty hard.

No but you can change the year in the past you are comparing it to. If you compare boom to boom and bust to bust you would get a more accurate picture of the differences.

[bizaro86]

Originally Posted by GGG

No but you can change the year in the past you are comparing it to. If you compare boom to boom and bust to bust you would get a more accurate picture of the differences.

For sure. I think if we're trying to compare people now to people in the past, the most logical way to do it would be to compare the current situation to historical averages.

[Grimbl420]

Originally Posted by Lt.Spears

If were talking about rental rates, most of the rentals i saw when looking at properties were from 1100-1900/ month.

With 10% down a mortgage fora similar property was about 1500-1700/month over 25 year amort.

Just made sense to buy.

What if you don't have the 10%, and saving it isn't in your near future? At 32, with a large student loan to pay off and 3 people to support, my income is not enough to have much hope of ever owning a house.

You also have to factor things like insurance, property tax, and cost of up keep into your equation. Those easily push purchasing a house out of reach for many renters.

[JohnnyB]

I've often thought about buying property here in Shanghai, but it's much more difficult for young people here to do so. First payments on homes are 50%, meaning you need to have a lot of cash up front or you just can't get into the market. Making it worse for most people here, the average cost for property is something around 40,000Rmb/square meter and most people here don't make anything close to enough to afford that themselves. Even 10,000rmb/month is considered a pretty good salary for a lot of young people here. The result is basically that young people simply can't afford to buy property on their own and are entirely dependent upon their parents buying apartments for them.
It makes Shanghai a very difficult and high-pressure place to live for young people who aren't from families capable of taking care of them financially.

[macker]

Originally Posted by bizaro86

What do you plan to have society do with a bunch of goods that we produce but we don't intend to consume?

Act locally.....think globally

[Red]

Originally Posted by bizaro86

Someone just graduating now can't exactly go back to 2003 and buy a house then. A new university grad this may would have been ~12-15 years old in 2003, which would have made getting a mortgage pretty hard.

True, but the same can be said about someone who bought in the late 70's boom and lost it all few years later. In 1985 there were a lot of people in financial ruin. That's why houses were so cheap.

We can't just cherry pick these things. RE is cyclical so maybe we just need to wait a few years for it to be more affordable? Or is todays youth unable to wait to get their granite countertops and stainless steel appliances?

[bizaro86]

Originally Posted by macker

Act locally.....think globally

Globally, we can't really produce more than we consume, unless you're planning to start exporting things to mars.

[macker]

Originally Posted by bizaro86

Globally, we can't really produce more than we consume, unless you're planning to start exporting things to mars.

Your back to this again.....nm

[bizaro86]

Originally Posted by macker

Your back to this again.....nm

Yeah, because you keep responding to the same question with pithy sayings that don't mean anything.

Maybe we should take all the extra goods we're producing and put them in a giant pile?

[jammies]

Originally Posted by bizaro86

Globally, we can't really produce more than we consume

Actually, that's pretty well what a lot of military spending is - production for the sake of stockpiling. And, for that matter, there are plenty of consumer goods that fail to sell and are eventually junked or destroyed. Not to mention wastage and breakage of products before they get to market.

Logically, the sentence only makes sense the other way: we can't consume more than we produce.

[bizaro86]

Originally Posted by jammies

Actually, that's pretty well what a lot of military spending is - production for the sake of stockpiling. And, for that matter, there are plenty of consumer goods that fail to sell and are eventually junked or destroyed. Not to mention wastage and breakage of products before they get to market.

Logically, the sentence only makes sense the other way: we can't consume more than we produce.

That's fair enough, you can produce more than you consume if you waste it or stockpile it.

But his original statement was that we should switch to a more production based economy and away from consumption. I'm not sure why we'd want to produce more goods and then waste and/or stockpile them. How is that better than consuming them?

[GP_Matt]

I am pretty sure he wants us to sell more internationally than we purchase.