Mountain of debt that will have to be scaled

Disinherit your children. Do it now.

If you don’t, you might be putting their children at risk.

Signs are everywhere that theirs could be a life of debt groundhog day – except the debt would keep growing. This vicious debt-feedback loop is what the IMF is warning will get worse if governments and central banks don’t stop what they’re doing.


More on that later.

First, the issue of skipping a generation and passing on wealth and homes to grandchildren.

This is the message last week from a government minister. Why? Because the younger generation don’t stand much chance of affording to buy a home of their own.

He should know. He is the United Kingdom’s minister for housing.

I like this idea. It sort of does away with a certain level of bickering – although it runs the high risk of bringing about an entirely new one – but that’s not all. In his call for this, Gavin Barwell, the UK’s minister for housing, shared his own related financial back story.

His mother will be leaving her estate and £750,000 (Dh3.3 million) property to his two sons. Having an open conversation around wealth and money is a good thing, I believe – and he’s doing it.

His aim is to tackle inter-generation unfairness. And boy is this a massive, giant, huge problem. It’s not just an intellectual issue – it’s one of the reasons we face a scary global phenomenon.

I mean, gosh, who’d have thought it: Trump as a contender to rule the US, Brexit having been voted for, populist presidents elsewhere, both alive and dead, gaining ground.

Chairman Mao – it’s 40 years since he died – is more popular than ever in China – precisely because of fiscal unfairness. The only other large countries to have such a chasm between the haves and have nots are South Africa and Brazil. Communist China, the world’s most populated nation, is now far less equal than the capitalist US.

And we should all take note. I mean be scared of social unrest, of fiscal strife. Especially as the private sector – that’s people like me and you, households and companies – is responsible for two-thirds of the world’s record (and increasing) $152 trillion of debt.

This is the figure the IMF arrived at a few days ago, having, at last, taken a comprehensive look at indebtedness. What took them so long?

So is this the era of the vicious feedback loop.

You see, central banks decided low interest rates would be a way out of global financial problems because it would encourage borrowing, spending, and help economies grow.

But borrowing increased much more than growth, with the result that we’re more in debt now than we were during the crisis and recession of 2007 to 2009.

The fear is that this will trigger a new economic crisis.

The tipping point to chaos and crisis can come from anywhere. Like China. Especially in this time of resentment towards elites.

The World Economic Forum, IMF and others, are churning out papers that tell us what we know: we’re in trouble. With titles like: the world economy is moving sideways, theirs is usually taking stock of things that passed, with choice stating of the obvious like: “In short, growth has been too low for too long, and in many countries its benefits have reached too few — with political repercussions that are likely to depress global growth further”.

They want what they call “growth-friendly fiscal policies”. But what are they, and how will they affect our lives?

We are fed warnings but no clear suggestions on how to stay safe.

With this in mind, I wholeheartedly recommend you take the time to watch Bird and Fortune – a satirical British interview series that cuts through the jargon and lays bare all for us to grasp, making sense of financial jargon, behaviour and excuses churned out by the corporate and political world.

I watched a wonderfully edited few episodes on YouTube last night. These are years old now – but as relevant as ever.

The title is: Bird & Fortune – Silly Money – Investment Bankers. Unfortunately for us, the issues they tackle with banks, bankers, policy and debt still hold true today.

Humour aside, heed the message: keep your money close. And help the next generation who really need it: the young of the world.

Nima Abu Wardeh describes herself using three words: Person. Parent. Pupil. Each day she works out which one gets priority, sharing her journey on finding-nima.com.

pf@thenational.ae

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