The facts about houses and avocados (Bernard Salt is an arrogant prick)

“Bernard Salt is a futurist who uses demographic and social change to interpret how society and business might evolve.”

I’ll just leave that there for a moment.

Another day, another self-righteous Baby Boomer castigates themselves in the court of public opinion by equating Millenial eating habits with financial ruin, this time at the expense of ubiquitous hipster-licious avocado. It happens so often that a veritable army of hipster economists are armed and ready to update their innumerable Food / Beverage / TV / iPhone / Overseas Holiday vs. House Price charts to ‘smash’ down the ignorant Boomer home-owner the second they start tweeting so much as a “When will Gen X/Y… blah blah blah”.

Barely is the ink dry and the hashtag offending eyeballs before the glorious chorus of #StopRightThereOldFartDon’tYouDareGenYMeYouIgnorantDoucheBag is unleashed in an unstoppable wave of righteous Millenial indignation and sarcasm. And Bernard Salt did so in textbook fashion, without so much as a trace of economic, financial or demographic analysis to back up his intergenerational condescension, as might be appropriate for an economist and demographer. (Just saying).

It was very nearly a “Let them eat cake!” moment, were it not for the fact that it was actually worse. He basically said “Don’t let them eat cake… and definitely don’t let them eat smashed avocado!”. Fuck me! Did this guy not watch that dreamy Kirsten Dunst film about French Baby Boomers stuffing themselves full of avocado, oblivious to the peasant mob sharpening the guillotines at the foot of their 700 room inner-city bungalow / castle in Paris?

In that light, I’m actually a bit worried that Bernie’s ill-researched outburst puts him at risk of physical backlash, as the rising ranks of young renter scum – otherwise content to survive on smashed avocado brunches, and not even expecting any cake – treat his spray of toast crumbs in The Australian with the contempt it deserves.

And to be fair, it’s not like there’s no truth in what he says, it’s just that he’s completely wrong and his argument utterly devoid of facts. Hmm. Well, at least in regard to housing affordability. I mean $22 is a fuck-load to pay for avocado on toast. But what a delicious irony it is then that the price of avocado on toast is partly driven by its input costs, chief of which would be… you guessed it, LAND! But you do need to be an economist to grasp such subtleties, and it’s far more fun to just rag on hipsters, they get so angry about stuff!

Either way, lets have a look at the facts before we string up poor old Bernie, he was just having a crack. It’s not his fault that he belongs to the landed gentry, enjoying an all-you-can-eat tax-break buffet at the taxpayer’s expense, what to speak of the once in a 100 year demographic tailwind (hello Bernie?!) and never-to-be-repeated financial engineering and pro-bubble policy supports. Anyone (everyone?) in his position would be equally myopic as to the underlying atrophy in Australian society and political economy. Lets give him the benefit of the doubt and look at the facts.

Just sampling the last few weeks alone of obsession with Australian housing, we have all the news we need to explore the relationship between housing and avocados in a more evidence based manner:

Housing and avocado facts

• By every official international analysis and measure, Australian housing is close to (if not the) most overvalued in the world, with house price to income and rent ratios at nosebleed levels. The value of housing stock is approaching 350% of GDP, or 3.5 times the size that it was for most of the 20th century, and beaten only by China’s own housing bubble and Japan’s economy destroying housing bubble from the 80s. Nearly all other countries around the world are able to afford heaps more smashed avocado breakfasts.
• Australia’s household debt to GDP ratio is the highest in the world at 125% of GDP, with each man, woman and child owing an equivalent of $71,234, or 3,238 smashed avocado breakfasts, meaning that every man, woman and child must eat 3 less smashed avocado breakfasts per week for the next 20 years to pay off all the debt.
• The average savings rate (amount of income not spent on smashed avocado breakfasts) is higher than any point since the 1980s, and youngsters aged 25 to 34 are actually above average savers. This indicates that most young folks are indeed forgoing their fourth weekly smashed avocado breakfast – but with house prices where they are, clearly the third has also got to go.
• More than 50% of all first time buyers use the ‘Bank of Mum and Dad’, relying on financial assistance from family to cover their smashed avocado breakfasts, thereby freeing up income for saving a house deposit that now takes 3 times as long to save as it did for Boomers under what is widely acknowledged as avocado-austerity conditions.
• A recent survey by UBS shows that mortgage fraud is systemic in Australia, with 28% of all mortgages being liar loans, as borrowers fail to disclose to lenders the full number of smashed avocado breakfasts they consume per month. Some survey respondents underestimated the number of breakfasts by more than 50%.
• Record numbers of first home buyers are flocking to interest only loans in a dangerous precedent with parallels to the US sub-prime avocado accident that triggered the GFC.
• 300,000 home owners are in neutral / negative equity, indicating the severe risks to financial stability posed by housing debt and too many smashed avocado breakfasts. A fall in house prices could result in a sudden rise in mortgage delinquencies and a collapse in smashed-avocado-related economic activity.
• The IMF has just warned that Australia’s record household debt poses severe financial stability risks and is damaging the economy, as the record private debt burden means less and less people are contributing smashed avocado breakfasts to aggregate economic growth.
• AHURI has released research showing that over-investment in housing destroys economic productivity, as abstinence from smashed avocado breakfasts (required to afford Australian housing) saps the people’s will to live.
• Non-avocado related consumption growth in the economy is tanking fast, as smashed avocado breakfasts are swallowing up aggregate disposable income, and budget cuts at the ABS mean that official consumer activity index has not been able to properly survey smashed avocado breakfast consumption and its contribution to consumer price inflation.
• Rental growth and rental yields are the lowest on record, as miserable renters are spending way too high a proportion of their incomes on smashed avocado breakfasts to take their mind off financial oblivion.
• Housing markets across mining states are collapsing, as mining workers that had it too good during the boom are behaving like the boom never ended, and are eating way too many smashed avocado breakfasts. Before long, this reckless behaviour is likely to spread to the big city housing markets, and asset prices succumb to smashed-avocado-deflation-contagion.
• The RBA issued an official warning on the pending apartment market correction, as a shortage of potential first home buyers created by too many smashed avocado breakfasts threatens to burst the housing bubble and take down the economy, with the construction industry collapsing under the weight of avocado-induced house price deflation.
• Ratings agencies Moody’s and S&P have both warned on the mounting oversupply of inner-city apartments and bank’s extreme exposure to mortgages, as nearly two thirds of their loan books are concentrated in residential mortgages and avocado futures.
• Even major property developers are beginning to panic as evidence that tightening of domestic investor lending and foreign real estate purchases is creating a massive settlement risk and reversing foreign demand for oversupplied apartments. Australians aren’t the only ones who enjoy a smashed avocado breakfast, and all those rich foreign investors are increasingly unable to make up the mortgage deposit funding gap owing to their own profligate brunch habits.
• Treasurer Scott Morrison goes on a road trip to tell the world that Australia has no housing bubble, owing to the fact that if we had a housing bubble, people wouldn’t be able to afford so many smashed avocado breakfasts, thereby confirming that we do indeed have the mother of all bubbles, because according to Bernard Salt the level of smashed avocado breakfast consumption is clearly unsustainable.
• Bernard Salt tells Millenials to solve housing affordability by eating less smashed avocado breakfasts, thereby tolling the bell for the top of the greatest bubble in Australian history. The only way to delay the bubble bursting now is for everyone to eat less smashed avocado breakfasts, thereby ensuring the stock of greater fools is replenished long enough for Bernie to take his self-styled “fashionable retirement”, as his significant housing equity is able to fund as many smashed-avocado breakfasts as he likes, because he’s earned them.

So in Bernie’s defence, it would seem that there is indeed a significant relationship between smashed avocado breakfasts and Australia’s 20 year long housing bubble, but it’s not the one-dimensional relationship with fiscal responsibility that the “Middle Aged Moraliser” scornfully posits through projectile flecks of hard-earned green breakfast fruit.

Far worse than the inability of Australian youth to practice avocado-austerity adherence, is the disturbing fact that unaffordable housing is secondary to the irreparable damage caused to our once productive, dynamic, diverse and competitive economy by over-investment in smashed avocado breakfasts, and the terminal build up of severe risks to both personal and public financial stability caused by the highest level of smashed avocado breakfast debt in the world. We spent the last 20 years putting all our avocados in one basket, leading to a hyper-concentrated and unsustainable debt-fuelled economy, having experiencing the fastest de-industrialisation in the developed world.

Manufacturing now represents some 6% of GDP, as compared to around 12% in the 80s, whereas the finance, insurance and real estate (FIRE) sector has grown from 6% in the 80s to now comprise some 12% of GDP, a complete trading of places between ‘making things’ and ‘speculating on things’. This an over-concentration that even the IMF admits is damaging to long term economic prosperity. Australia once had a classic ‘mixed economy’, but now we now have nothing more than an avocado and real estate economy. More fool us.

Smashed avocado breakfasts have a lot to answer for, and in time it seems likely that even hard working Bernard Salt may need to forgo his third or fourth weekly brunch dose in order to begin piecing our shattered economy together again.

In my mind, this leaves three serious questions for poor ole’ misunderstood Bernie to answer:

• On what measure is Australian housing affordable other than the smashed avocado index?
• On what basis is Australian housing not in the largest and most dangerous asset price bubble in our own long and dangerous bubble history, and in comparison to widely studied global housing bubble history?
• Even if you believe the first two points to be miraculously irrelevant or incorrect as applied to the Australian situation, how can you possibly deny the extremely well researched and documented destruction to economic sustainability, financial stability, wealth equality and political progress caused by:
  1. the highest levels of household debt in the world?
  2. amongst the most expensive housing in the world?

While Bernard may be unfamiliar with such questions, young Australians are all too familiar with this trifecta of shit facing the economy, the financial system, and the ability to afford housing. His article grossly misjudges hipster wannabes, because unlike Bernie, young Australians are predominantly aware that:

• Housing at current prices represents the worst value for money in history
• Housing at current prices represents the highest risk to personal finances in history
• Housing at current prices represents the lowest prospect for future price gains in history
• Housing at current prices represents the shittest investment in history, as rental growth and yields plumb record lows
• Housing at current prices represents the highest risk to the stability of the financial system in history
• Housing at current prices has helped drive the largest de-industrialisation in history, which will severely endanger any ability to service a 40 year mortgage in the future, let alone afford smashed avocado breakfasts.

Young Australians get it. We are smart enough to realise that in light of these facts, forgoing yet more smashed avocado breakfasts to get a foot on the property ladder (pyramid) at this stage is universally NOT A GOOD DEAL. As Chris Richardson from Deloitte Access Economics remarked in regards to the investment prospects for Australian residential real estate:

“They should have as much quinoa porridge and as much smashed avocado as they want because inevitably property prices are going to come down and their patience will be rewarded.”

Viva La Avocado Revolucion!

Remember that dreamy quote from Salt’s own website that I left at the start of this article? Where he describes himself as a “futurist who uses demographic and social change to interpret how society and business might evolve“?

Well, Bernie’s self-described futurism and prediction of social and demographic trends has so far failed to spot the evolution of an imminent dystopian future for Western Boomer-run neoliberal debt-fuelled asset bubble economies, brought to their knees by private debt saturation and de-industrialisation.

He has failed to identify and explain the groundswell rebellion of ‘heterodox economics’ against the prevailing (and failing) neo-classical order of financialised capitalism, equilibrium theory, monetarism, private debt ignorance, theft by privitisation, population growth Ponzi-nomics, monopoly protectionism and worst of all: the sacred status of the creditor and rentier above any common or public interest.

He has so far failed to predict the global revolt of the young and aspirational classes against those that would sit in their Avocado Towers pouring scorn on their own young. The revolt against those very same Boomer-crats who simultaneously completely miss the fucking point as to why the likes of Donald Trump and Pauline Hanson – regardless of their respective moral vacuums – are being used as figurative or literal Molotov cocktails to try and destroy the rotten and shaky edifice created by the arrogant, corrupt, short-sighted, nepotistic, tax-advantaged scions of the neoliberal era; the sole beneficiaries and champions of the fastest deterioration in working class living standards since the Gilded Age of the late 19th century.

Bernard Salt, I’m sorry to say, you’re not just an arrogant prick, you’re also a shit economist and an irrelevant futurist.

Your lot fucking wrecked the place Bernie, and typical of all such eras throughout history, your own blindness and hubris has sewn the seeds of destruction of your presumptive political, social and economic advantage, as the young avocado munchers of the world begin to amass with torches at the iron gates to your 700 room Californian bungalow.

Enjoy your $22 I-already-raised-my-family brunch while you can you self-righteous irrelevance, because thanks to the brutal honesty of Baby Boomer representatives like yourself, young people are becoming less and less squeamish about stealing the smash right off your hipster-cafe table. We gave you crates to sit on so that your ageing legs would be too seized up to run away or fight back as we stuff our faces with your future-eating, economy-smashing brunch.