France Is a Dead Country

By Bill Bonner on June 3, 2015

“Old people, they should be killed at birth.”

Boris Vian

Still nothing to report from the financial markets. The Dow and S&P both ticked up about a half a percentage point yesterday. And gold has been hovering around $1,190 for over a week.

Is everyone at the beach already? Are investors waiting for something to happen? We don’t know…


“France is a dead country.”

A young man gave it to us straight.

“If you are young and you have any ambition, you leave France. You go to London, or the U.S.A., or China. There’s no point staying in France. I am French. It breaks my heart to leave. But I can’t stay. I don’t like being dead that much.”

Our friends in Paris tell us the same thing. Their children have left. If they want to visit their grandchildren they have to travel overseas.

Meanwhile, prices of top properties in London, Vancouver, and New York are higher than ever. But prices in Paris are soft.

“We’d like to sell our house [in Paris],” says a friend. “It’s perfect for a young family. But the young family we would sell it to has moved to London.”

Maybe it’s the weather. Maybe it’s the economy. But the capital of the Fifth Republic seems depressed. And old.

“The Biggest Scandal in France”

Yesterday, we took the train out to Normandy. We bought first-class tickets, hoping to have some extra space to work. But the first-class compartment was the same as second class. Only shabbier. The seats were grimy. The upholstery was worn and greasy.

“What is the difference between first class and second class?” we asked the ticket taker when he went down the aisle.

“Well, there really isn’t any, except that first class is more expensive, so there are fewer people.”

We looked into the second-class compartment. It had no more people than the first.

But we are not writing to pass along travelers’ tales. We keep our eyes open in the hopes of learning something. And what we are learning here in France is that it has the same problems as the U.S. – maybe worse.

Young people do not leave the country only because it is sluggish and stale; they leave because it is rigged against them.

This is “The biggest scandal in France,” as the magazine Le Point calls it. It calls its young “The Generation of Pigeons.”

In France, as in America, older people have used government to give themselves money and privileges… and turned the young into chumps.

For example, the average income tax rate on a 30-year-old is nearly three times as high as the rate on a 65-year-old.

The unemployment rate for young people aged 15 to 24 is two to three times higher than the rate for older people.

For those who dropped out of high school, barely one out of two has a job.

And French employment law is infamously favorable to people who are already in the system – but vicious to those who aren’t.

We spoke to a friend of ours who works for the EDF Group – the big power company. “How many weeks of vacation do you get?” we asked.

“Ten…” came the answer. And recently, his fellow workers went on strike when the company tried to reduce it. Nearly two and a half months of paid vacation! Good grief… he could take the whole summer off.

Again, this may be great for existing employees, but it makes the company very reluctant to bring on new ones.

Our Generation Has Failed Its Own Children

The poor jeune Frenchman also has the burden of debt. In this sense, at least, he has an advantage over the American. French schools – even university studies – are paid by the taxpayers. So graduates do not leave school with student debt as they do in America. Still, they have their share of government debt on their shoulders.

A young person in Germany has about $30,000 worth of government debt to look forward to. In France, the figure is closer to $40,000.

By way of comparison, the U.S. total is about $57,000 (according to our back-of-the-envelope calculation). And if we include the financial obligations not included in the official “national debt” figures, the sum rises to about $700,000.

Most, but not all, of this debt comes from reaching into the future in order to give things to old people today.

But wait. Le Point brings up another way in which the old – our generation – has failed its own children.

It cites the work of American sociologist Robert Putnam and his book Our Kids: The American Dream in Crisis. Putnam points out that almost all old people grew up in families with two parents present.

They weren’t necessarily good parents. They weren’t often rich parents. They smoked. They drank. They referred to homosexuals in terms that would be regarded as hate crimes today. But they gave their children something that many of today’s young people will never have.

In 1960, only 6% of American children lived in a household with only one parent. Since then, says Putnam, American society has split apart. Only a third of today’s children live in traditional families, where they are encouraged to do well in school, get jobs, and form “normal” families of their own.

The other two-thirds live less orderly, less purposeful lives. And about half of today’s children spend at least part of their childhood in single-parent households, with higher rates of school failure and subsequent unemployment.

What to make of it?



June 03, 2015
Paris, France

Market Insight Header

Publisher’s Note: Market Insight editor Chris Hunter is traveling to the annual private meeting of members of Bill’s top-tier family wealth advisory, Bonner & Partners Family Office. He’ll be back in his regular slot on Monday. Until then, here’s an excerpt from Bill’s newest investor presentation about a fatal flaw in the U.S. economy that could affect all the cash you have in your bank account… and your ability to access it.

Right now monetary velocity is at its lowest point in history. People aren’t spending the $250 billion in actual U.S. dollars… it’s staying put in their mattresses and safety deposit boxes…

So people are spending something else…

And here it is…

060315 DRE credit

The terrifying source of all our money…

It’s our credit system.

As you can see, for the past 30 or so years it’s been growing exponentially.

That’s why…

…Although wages have been falling since the 1970s…

060315 DRE income

…And although we spend our dollars less and less…

060315 DRE monetary

America still appears to be getting richer and richer.

Since the 1970s, the credit system in America has grown to become our biggest – and most crucial – asset…

More than TWICE the value of every single home in America put together…

More than THREE TIMES the value of every single U.S. bank’s assets combined…

More than 20 TIMES the trillions of dollars the U.S. government collects in taxes every year…

But it’s also our biggest liability.

Because at some point all that credit can only exist if people believe they’ll get paid back.

That is… if they believe that there’s enough money in America to pay back all of that $60 trillion in outstanding credit.

And here’s the truth… There isn’t.

Our credit system is insolvent.

And when it fails… which it will surely do… it could wipe out more wealth than any other crisis in history.


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