Mohamed Hassan/Pixabay

Why Johnny can’t afford a house — and what he can do about it

Our young generation is robbed of a financial future as their money loses value because of our nation’s spending and money policies

Michael P. Stack is retired from a more-than-30- year career in the financial services industry, primarily in Boston. He has a master's degree in finance and was trained as a certified financial analyst.

SAXTONS RIVER-I want to explain the empty calories inherent in our insanely aggressive fiscal and monetary policy and explain the negative impact on our taxpayer - and, importantly - future taxpayers.

Here's the conclusion up front: Neither party is representing our needs in this matter.

Why are so many families having a difficult time making ends meet?

Many young people feel the dream of owning a home will never be within reach. While I'm a born optimist, for the first time in my life I'm starting to actually believe that their fears may be justified.

* * *

The inflation and accompanying asset bubble that has been created by profligate government spending and hyperaggressive monetary policies has created a historic income and wealth disparity. If you were not on that asset bubble train when it left the station, you may be out of luck.

Unfortunately, those in our leadership class have devolved into believing they can correct such problems only by redistributing wealth and spending more. Every new "creative" solution they come up with just throws more coal on the fire, and the asset bubble train speeds farther from the station.

Those left there? Yes, you guessed it - they're withering on the empty calories of false campaign promises.

* * *

When was the last time anyone heard a politician say that we need to stop or even slow spending? I mean, seriously - I do not remember the last time I heard a genuine cost-cutting proposal that wasn't a redistribution strategy cloaked in equity, climate change, or some other "just cause."

The facts:

Our asset bubble as reflected in real estate values: Housing values as measured by the S&P CoreLogic Case-Shiller U.S. National Home Price Index are 70% higher now than they were at the last peak of artificially induced price levels. That high was in August 2006, just before the collapse of the subprime credit market.

When that bubble burst, it took us into the Great Recession, a historic 18-month pullback. I will repeat, we are now 70%.

Super-aggressive monetary policy: The Federal Reserves' $7 trillion balance sheet is $5 trillion (yes, with a T) higher than it was during the Great Recession.

Simplistically, printing or digitizing more dollars reduces the value of those in your pocket. This is what drives inflation, devalues the currency, and makes your disposable income shrink.

In that scary world, real things hold value; paper things (401K, savings, cash) don't. Everyone knows the historic examples: Weimar Germany, Brazil, Venezuela, etc. A very good book on the subject: When Money Dies by Adam Fergusson.

Super-aggressive fiscal (spending) policy: Our spending-driven leverage relative to gross domestic product at 124% has reached historic highs. Borrowing money, or leveraging, at a time of financial stress is a very risky strategy.

We have essentially doubled our debt-to-GDP ratio since the last major financial crisis in 2008 and are at levels unprecedented in the last 100 years.

* * *

What can you do?

Face it - the smart money is already on board the proverbial asset train. If you did not get on or were too young to have the capital necessary to buy a ticket, you really only have one option: That is to speak with your vote.

To our future taxpayers: While this may sound counterintuitive, you are being "punked" (your terminology). You have to convince your elected officials that the borrow-and-spend policies and behaviors of the past are robbing you of a financial future. Demographically, you will end up holding the bag for the mountain of debt that they claim is being generated on your behalf.

Even if your generation never actually can pay off the debt, you will be left with a currency that is so depleted that your parents' standard of living will just be a memory.

One way or another, you are going to be held accountable for $34 trillion in debt. Visualize a 20-story building of $100 bills covering an entire football field. I believe the younger generation is already picking up the tab for these policies with the reduced purchasing power that they are already experiencing.

I hate to be the bearer of the bad news, but the easy money has been made. If you want a shot of catching the runaway asset train or getting it to come back to the station, you are going to have to dramatically change your thinking. You are going to have to change the demands you place upon our, and eventually your, leaders.

My father's first house cost $15,000 in 1960. Today, that house is on the market for 21 times that amount.

What will your first house and your children's first houses cost? Do the math: Will you even be able to afford the down payment?

Stop falling for empty financial calories and the promise of free money.

This Voices Viewpoint was submitted to The Commons.

This piece, published in print in the Voices section or as a column in the news sections, represents the opinion of the writer. In the newspaper and on this website, we strive to ensure that opinions are based on fair expression of established fact. In the spirit of transparency and accountability, The Commons is reviewing and developing more precise policies about editing of opinions and our role and our responsibility and standards in fact-checking our own work and the contributions to the newspaper. In the meantime, we heartily encourage civil and productive responses at [email protected].

Subscribe to the newsletter for weekly updates