3 ms·

It's not a ponzi scheme, it's a numbers game. Basically the formula is: X * Y = A * B, where X is the number of retirees, Y the number of years they live past r

by Joeri 9y ago

It's not a ponzi scheme, it's a numbers game. Basically the formula is: X * Y = A * B, where X is the number of retirees, Y the number of years they live past retirement on average, A the number of people who work, and B the number of years an average career lasts. What is happening in europe is that the right-hand side of the equation is producing a lower number (due to later career starts and less actively working population), which requires reducing the left-hand side accordingly (by increasing retirement age or cutting pensions). The system cannot collapse (there's always a right-hand side), but it can require severe adjustments.

user5994461 9y ago
The base is a ponzi scheme. Promise to pay people over 65 a guaranteed sum per month and hope that the taxes on working people can fund it. You're right that it doesn't have to be a ponzi scheme. The government could increase the age of retirement and/or lower the pensions. However that's not possible in practice, it doesn't get you elected and it'd provoke massive strikes for months. The government would rather accumulate debt for 20 years than cut any pension. Then the next generation has to deal with unfunded pensions and trillions of debt. It's actually possible to go beyond recoverable and collapse because of the non elasticity, this has happened before historically.
- RobertoG 9y ago
  >"Then the next generation has to deal with unfunded pensions and trillions of debt" That doesn't make any sense. The next generation could have enough real resources or not. If they have they will be OK, if they don't they will have a problem. Real resources in the future come from investment now, not from "saving money". Saving money makes sense in a personal perspective, but not as a nation.
  - user5994461 9y ago
    You can't save money personally. The nation takes 20% of your gross salary to pay retirees. You don't have a choice. In exchange, the nation promises to give you 80% of your last average salaries as a monthly income after you retire (in half a century) until the end of your life. These numbers are not linked to real resources and are not adjusted periodically.
- TheCoelacanth 9y ago
  The "guaranteed sum" is not really guaranteed because the sum is denominated in a currency that is not pegged to any real resource. If the next generation can't produce enough real resources, then the pension amount will just be decreased via inflation.
konschubert 9y ago
Not exactly. More like: Number_of_retirees * averagr retirement_payment = number_of _people * average_retirement insurance_payments You can also prop up the right side with tax money from other sources. I'm not saying it's perfect or even that it works well. But there is nothing inherent in it that requires a growing economy.
RobertoG 9y ago
Don't you think that your formula needs a productivity term somewhere? How is that when we talk about this, nobody mentions that if the gross domestic product per capita goes up enough, there is not problem. The 'savings' perspective makes only sense in the personal sense. I mean, the problem is not money. If in 20 years we have robots, infrastructure, cheap energy, etc enough for feeding and taking care of everybody there is not problem. If we don't, never mind the 'savings' that you have, because the real limit are real resources.
- konschubert 9y ago
  This whole thread is weird. People think that paying retirements through social security means that future generations have to shoulder the burden. But if they instead "save" the money, somehow they won't have to? In the end, the bread that goes on the table in 50 years will be produced by a farmer of the future generation. Savings and social security are just two different ways of writing the same contract.
  - deleted 9y ago
    [deleted]

by Joeri 9y ago

user5994461 9y ago

The base is a ponzi scheme. Promise to pay people over 65 a guaranteed sum per month and hope that the taxes on working people can fund it. You're right that it doesn't have to be a ponzi scheme. The government could increase the age of retirement and/or lower the pensions. However that's not possible in practice, it doesn't get you elected and it'd provoke massive strikes for months. The government would rather accumulate debt for 20 years than cut any pension. Then the next generation has to deal with unfunded pensions and trillions of debt. It's actually possible to go beyond recoverable and collapse because of the non elasticity, this has happened before historically.

RobertoG 9y ago
>"Then the next generation has to deal with unfunded pensions and trillions of debt" That doesn't make any sense. The next generation could have enough real resources or not. If they have they will be OK, if they don't they will have a problem. Real resources in the future come from investment now, not from "saving money". Saving money makes sense in a personal perspective, but not as a nation.
- user5994461 9y ago
  You can't save money personally. The nation takes 20% of your gross salary to pay retirees. You don't have a choice. In exchange, the nation promises to give you 80% of your last average salaries as a monthly income after you retire (in half a century) until the end of your life. These numbers are not linked to real resources and are not adjusted periodically.
TheCoelacanth 9y ago
The "guaranteed sum" is not really guaranteed because the sum is denominated in a currency that is not pegged to any real resource. If the next generation can't produce enough real resources, then the pension amount will just be decreased via inflation.

konschubert 9y ago

Not exactly. More like: Number_of_retirees * averagr retirement_payment = number_of _people * average_retirement insurance_payments You can also prop up the right side with tax money from other sources. I'm not saying it's perfect or even that it works well. But there is nothing inherent in it that requires a growing economy.

RobertoG 9y ago

Don't you think that your formula needs a productivity term somewhere? How is that when we talk about this, nobody mentions that if the gross domestic product per capita goes up enough, there is not problem. The 'savings' perspective makes only sense in the personal sense. I mean, the problem is not money. If in 20 years we have robots, infrastructure, cheap energy, etc enough for feeding and taking care of everybody there is not problem. If we don't, never mind the 'savings' that you have, because the real limit are real resources.

konschubert 9y ago
This whole thread is weird. People think that paying retirements through social security means that future generations have to shoulder the burden. But if they instead "save" the money, somehow they won't have to? In the end, the bread that goes on the table in 50 years will be produced by a farmer of the future generation. Savings and social security are just two different ways of writing the same contract.
- deleted 9y ago
  [deleted]