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Government provision does not have to be based upon savings. In its simplest form it is just an obligation (of the current working generation towards the elderl

by lsd5you 16y ago

Government provision does not have to be based upon savings. In its simplest form it is just an obligation (of the current working generation towards the elderly), and if this is not tied to monetary figures then it is much less vulnerable to financial turmoil and trickery.

nostrademons 16y ago
What happens when there are many more elderly than current working people? The article suggested planning for 30 years in retirement. If that follows a working life of 40 years which follows a childhood of 25 years, then each working person is supporting 1.5 dependents. Assuming a steady-state population; if you have a baby boom followed by a baby bust followed by another baby boom, it gets worse. That's a big obligation.
- skybrian 16y ago
  I find it useful to remember that finance can only solve problems to the extent that it changes what people do in the real world. What is retirement savings, but a way for older people to convince younger people to do work for them? Money is a persuasive way of doing that, but regardless it's older people depending on younger people to take care of them. Compare these scenarios: - people save for retirement, so many old people are have money to spend. Lots of young people go into occupations that help old people because that's where the money is. - the government provides pensions, so many old people have money to spend. Lots of young people go into occupations that help old people because that's where the money is. Either way, the real-world effect is the work that young people do. There are always risks and they can't be wished away. The government could change the pension plan. (But note that in the U.S, social security is very well defended in Congress, and more older voters makes it more secure.) Or the price of services that old people need could go up because there are fewer workers or because they dislike the work. As an individual, having above-average savings helps, but by definition everyone can't be above-average. If all retirees double their savings and supply is fixed then inflation is inevitable. To a first approximation the only real-world solutions are to increase the number of workers (immigration or increased birth rate) or to to increase productivity so fewer younger workers are needed.
- lsd5you 16y ago
  As has already been said, private finance simply does not fix this problem, although it does increase the scope for the working generation to avoid their obligations - through stock market crashes and bouts of inflation. In fact that is pretty much what all such crashes are - savers losing out to the producers. Although not widely acknowledged it is practically policy to promise (in both the state & private sector) gravity defying returns and then let savers down with short sharp shocks. The actuarial assumptions for pensions are returns in the region of 6-8%. The only way savings on average can reach these returns is if there is amortized monetary inflation of 6-8% or 4-6% in real terms if you generously give 2% for productivity. This is of course significantly more than the modal average inflation rate, whence the need for 'corrections'. The unaddressed issues are do pensions perform better than worse than average (consider during the boom private equity was routinely making 20% returns leaving less on the table for everyone else)? And what about borrowers who borrow not to invest, but because of urgency (not a significant amount of money after houses became state backed investments, which leaves gamblers, current accounts and cash in circulation to try to balance that see-saw).

by lsd5you 16y ago

nostrademons 16y ago

What happens when there are many more elderly than current working people? The article suggested planning for 30 years in retirement. If that follows a working life of 40 years which follows a childhood of 25 years, then each working person is supporting 1.5 dependents. Assuming a steady-state population; if you have a baby boom followed by a baby bust followed by another baby boom, it gets worse. That's a big obligation.

skybrian 16y ago
I find it useful to remember that finance can only solve problems to the extent that it changes what people do in the real world. What is retirement savings, but a way for older people to convince younger people to do work for them? Money is a persuasive way of doing that, but regardless it's older people depending on younger people to take care of them. Compare these scenarios: - people save for retirement, so many old people are have money to spend. Lots of young people go into occupations that help old people because that's where the money is. - the government provides pensions, so many old people have money to spend. Lots of young people go into occupations that help old people because that's where the money is. Either way, the real-world effect is the work that young people do. There are always risks and they can't be wished away. The government could change the pension plan. (But note that in the U.S, social security is very well defended in Congress, and more older voters makes it more secure.) Or the price of services that old people need could go up because there are fewer workers or because they dislike the work. As an individual, having above-average savings helps, but by definition everyone can't be above-average. If all retirees double their savings and supply is fixed then inflation is inevitable. To a first approximation the only real-world solutions are to increase the number of workers (immigration or increased birth rate) or to to increase productivity so fewer younger workers are needed.
lsd5you 16y ago
As has already been said, private finance simply does not fix this problem, although it does increase the scope for the working generation to avoid their obligations - through stock market crashes and bouts of inflation. In fact that is pretty much what all such crashes are - savers losing out to the producers. Although not widely acknowledged it is practically policy to promise (in both the state & private sector) gravity defying returns and then let savers down with short sharp shocks. The actuarial assumptions for pensions are returns in the region of 6-8%. The only way savings on average can reach these returns is if there is amortized monetary inflation of 6-8% or 4-6% in real terms if you generously give 2% for productivity. This is of course significantly more than the modal average inflation rate, whence the need for 'corrections'. The unaddressed issues are do pensions perform better than worse than average (consider during the boom private equity was routinely making 20% returns leaving less on the table for everyone else)? And what about borrowers who borrow not to invest, but because of urgency (not a significant amount of money after houses became state backed investments, which leaves gamblers, current accounts and cash in circulation to try to balance that see-saw).