All Those People Moving Home To Save Money Will Cost Investors

china chinese family mother tiger

Photo: Erwyn van der Meer on flickr

I recently wrote an article about multi generational living that didn’t spark much interest from the Business Insider crowd, because most of the readers do not have to deal with the challenges of the average Joe.I understand that.

But perhaps this crowd had better pay attention if they have investments founded upon the idea that those slipping away from middle class status will add to their bottom line anytime soon.

Same goes for those thinking about China and making a buck there.

There are severe social dislocations in China, and sacrifices to be made in order to accumulate wealth.

Right after my article was written, an article appeared from the Wall Street Journal titled “More Americans Are Doubling Up”.

The Journal realises that this phenomena is becoming a real issue for the investment community.

The Journal essentially parroted my point, (though I am not accusing them of copycat behaviour), that if junior lives at home, you need fewer TV ‘s, and I had said certainly you don’t need another cable subscription.

Acted out throughout the United States, this adds up.

Investors beware.

Of course the article was “glass half full” and pointed out the possible massive demand from those who want to escape from mum and dad. The first commenter spoke of how crucial it was to get out of mum and dad’s house in order to personally grow. But I view all this posturing as a bunch of BS.

No one can really tell if these people are going to move out of mum and dad’s house. Family formation may take place, but within a multi generational setting and that will severly hurt investors thinking that real estate, or cable, or power will pick up in usage. All that could happen, but with the financial headwinds such as low wages, it may not happen after all.

Some bank on the Republicans desire to extend lending. Davos in 2011 is seeking a doubling of world debt. The Republicans see debt as profit, and their handlers, the big banks and hedge funds do as well.

So, we need to look at China to see if there are any answers there. Indeed, China is quite an eye opener. It turns out that single families cannot afford to live in cities after all. One third of Chinese families in the city farm out their children to grandparents and relatives. That is a big, big number folks. Chinese mums and dads are working their butts off to take care of their children in the COUNTRYSIDE. Wow. What a revelation.

So the Chinese cope with the high cost of living in a very disciplined manner. That is because they are warned that too much credit can land people in jail. Failure to pay on credit in China has massive penalties. Ah, but those penalties keep the Chinese from screwing up. They will eat rice all day before going into debt. As much as the Chinese leadership wants to squeeze the Chinese citizen, the more he is disciplined to cope.

That would drive bankers bonkers in the United States wouldn’t it? Without credit they can’t make a dime.

Looking at both systems for practicing strategic frugality, I like the US system better. Multi generational families make for parents and children bonding and that is missing in China.

As for investors, I think you could be cooked. I am no financial advisor and don’t offer stock advice, But if you think that you can make money off of main street while you churn the value of commodities upward in price, you have another think coming. You cannot squeeze blood out of a turnip. It will be interesting to see what happens in the next Republican housing bubble.

I know that both parties had a major hand in the last bubble, allowing the bankers to run wild under Clinton and W. But the next one will likely be generated by the Republicans. The question is whether the new strategic frugality will impact this bubble and shorten the duration of it. I could see a lot of folks who just get out from being under water in their mortgages trying to sell their way out of their mess before the crash takes hold.

Oh, the inventory!

So, without household formation there is an increase of wealth, but there is not a recovery of debt extension. The secret is out. To Wall Street and to our miserable government, recovery means recovery in the demand for debt. How novel if we recover without debt, with strategic frugality leading the way, putting more money in our pockets.

The Chinese, in a very difficult way, are already practicing strategic frugality. They don’t want a credit card from Chase. They would rather pay in cash, don’t you know? If doctors can work in China and have their kids live outside the city, we can at least make the jump to more multi generational living.

Oh I know, you kids still home will be ashamed. Grandma will miss out on the independent living where they charge an arm and two legs for crappy food. Oh, what a sacrifice! Truth is, that is a great way for everyone to have more money in the end isn’t it? To hell with the bankers I say, because they only make money on debt. And we don’t want their stinkin’ debt do we folks?

Whether in China or in the United States, frugality starts in the home. Proper set up of structure will keep the creditor away and heck, he may have to find a real job. And hedge fund guys won’t be able to screw with the value of your home.

Wouldn’t that be great? To the Wall Street Journal I leave this message: the silver lining is not recovery into the same massive cost of living trap Americans face. No, the silver lining is in the big middle finger of multi generational living that is shoved into the faces of greedy bankers everywhere.

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