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Pension funds may be wrecked in a future recession

• nicoburns 7y ago
  Maybe this will finally tip the political consensus towards a more redistributive taxation policy. The main thing stopping this from happening seems to be older people who are doing "just fine thank you". The worlds looming financial woes are entirely of our own making. We're not running out low on resources. We're just distributing them very inefficiently.
  • reese_john 7y ago
    What would you consider a more redistributive taxation policy?
    • xena 7y ago
      Tax the wealth of the rich
      • Shivetya 7y ago
        you can pretty much take their wealth and still not pay the negative spending in some countries. in the US the tax system is very progressive with a large swath of the population have little to no federal tax. the truth is the the public employee pension system has been far to generous for far too long and many are counting on a bailout from Washington to keep the largess going. I will post it over and over, Illinois is a prime example of what is wrong in the public employee pension system[1]. When you have twenty three thousand retirees pulling in 100,000 per year there is a problem. Chicago is in dire situation too from both too much largess and simply kicking the debt bomb down the road [2] There is not enough wealth in the US to tax to support this level of largess and it goes by unnoticed because it was designed to not be see by the public. If the only way to fix the pension system is for them to implode it is a far better solution than to tax our way out of it because the behavior has to change. Tens of millions of Americans are counting on their 401k retirements and such and the only true source of wealth that can be taken to fix the pension systems of public employees is to go after those 401k funds. There aren't enough billionaires to take all the money from [1] https://www.forbes.com/sites/adamandrzejewski/2018/10/26/illinois-100000-club-94000-six-figure-public-employees-and-retirees-cost-taxpayers-12b/#1ef8c93c481a https://www.forbes.com/sites/adamandrzejewski/2018/10/26/ill... [2] https://www.forbes.com/sites/ebauer/2019/01/10/the-problem-with-chicagos-pensions-is-that-there-is-no-low-hanging-fruit/#209ac5e05742 https://www.forbes.com/sites/ebauer/2019/01/10/the-problem-w...
        • scarface74 7y ago
          you can pretty much take their wealth and still not pay the negative spending in some countries. in the US the tax system is very progressive with a large swath of the population have little to no federal tax. That’s only true if you believe in the fairy tale that Social Security and Medicare taxes (around 15% between you and your employer) are held in a separate account and the money doesn’t go into the general fund with all other tax revenues.
        • pytester 7y ago
          >There aren't enough billionaires to take all the money from The top 1% own 40% of all wealth in America. There's not only enough money, this is by far the fairest way to square this circle. The vast majority of that wealth is not earned.
        • JoeAltmaier 7y ago
          I guess you have to move up to the trillionaires, then. Because they own half of everything. I favor large inflation, which bankrupts the trillionaire while the working Joe keeps earning 'new money' and does ok.
        • nicoburns 7y ago
          > in the US the tax system is very progressive Well that's hilarious. If the tax system in the US was truly progressive then it wouldn't have so many billionaires.
      • AlexTWithBeard 7y ago
        What's your definition of "the rich"? Does it include yourself?
      • cpursley 7y ago
        "Taxing the rich" and effective redistribution (and government spending in general) are two different things. In the United States, the top 1 percent of income earners pay a greater share of individual income taxes (37.3%) than the bottom 90 percent combined (30.5%). The bottom 50% of earners pay about 0% in income taxes. I believe this excludes capital gains. source: https://www.bloomberg.com/news/articles/2018-10-14/top-3-of-u-s-taxpayers-paid-majority-of-income-taxes-in-2016 https://www.bloomberg.com/news/articles/2018-10-14/top-3-of-...
  • ra1n85 7y ago
    I don't share the same view. Pensions, public and private, were supposed to take care of people after many years of work and contributions. Some now are nothing more than Ponzi schemes. I don't see how this (and the inevitable failures of this), combined with the structural problems in the economy, will inspire faith in the governments ability to properly allocate resources, acquired by people, to people.
    • ptero 7y ago
      I agree with you and I see the main problem with the current US pension system is the lack of clarity. This allows bureaucrats and politicians to spend money collected to support old folks in the future for unrelated pet projects now. Social Security and similar schemes are valuable (even if trust fund is completely spent SS would still provide good benefits from current contributions), but I personally trust my 401k more. My 2c.
    • barry-cotter 7y ago
      Defined benefit pensions have always been Ponzi schemes. When there’s an expanding economy and population that works fine. As soon as it stops the writing’s on the wall. That’s why defined benefit pension schemes have pretty much disappeared in the private sector. In the public sector there’s no one to say “We can’t afford this.” except politicians and regulators appointed by politicians. It’s not their money so they have no real incentive to stop it and promising public servants a great retirement wins votes now whereas the people who’ll have to pay for those pensions mostly can’t vote yet as they’re too young. This is a disaster that’s been a long time coming but it’s also been clearly signposted the entire time. Actuaries have known this for a long time.
      • jonahbenton 7y ago
        Good god, this is an awful opinion. Every economic system and model depends on future expansion of both capital and human resources. There are no theories of at scale planning for a future has less stuff and fewer people and no growth or even shrinkage. The "can't afford" BS is the mantra of private capital, which does a great job of funding the .1% and an awful job of funding the 99.9%, which is what pensions do. The fact that expected benefits may not be fully achieved due to, I don't know, inability to predict the future has been used as a straw man to dismantle what have been in historical terms far and away the most successful at scale future funding schemes. The repeated failures of unplanned models get lost down the memory hole. We need a new term to complement "Ponzi scheme" to capture the mass reality distortion that index funds make everyone their own best investment manager.
  • krapht 7y ago
    The per capita gross world product was approximately ~$18k/yr in 2017. No matter how efficiently you redistribute resources, you cannot exceed this number. Instead we really need to invest more in productivity gains for the world's bottom 90%.
    • ceejayoz 7y ago
      That would be true if the poor just socked that $18k away into savings. We know this isn’t the case.
      • krapht 7y ago
        What would be true? Sorry, I don't follow.
        • ceejayoz 7y ago
          The world's wealthy sock away a larger percentage of their wealth than the poor. Virtually every penny the poor obtain winds up back in the economy, and because of the economic multiplier effect, those pennies have a greater impact as they wind their way through the system. https://ips-dc.org/wall_street_bonuses_and_the_minimum_wage/ https://ips-dc.org/wall_street_bonuses_and_the_minimum_wage/ > All those dollars low-wage workers spend create an economic ripple effect. Every extra dollar going into the pockets of low-wage workers, standard economic multiplier models tell us, adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP.
          • _jgdh 7y ago
            That's a false choice. It's not a choice between paying banker bonuses or giving minimum wage workers an increase. Also, while I agree with the premise that it's better to increase the minimum wage could you explain why folks investing their bonuses in the stock market and therefore directing their capital towards productive companies is worse than consumers spending their money directly?
  • danieltillett 7y ago
    How is stealing from Peter to pay Paul going to help solve the world’s financial problems?
    • seanmcdirmid 7y ago
      Pensions are primarily a concern of the working class, the richer classes benefit from “growth at all cost” policies while everyone else falls behind.
    • bryanrasmussen 7y ago
      If Peter has greater than 90% of the world's wealth and Paul is starving to death then if you take 0.01% of Peter's wealth you can keep Paul alive. I don't know about solving the world's financial problems though, but somehow I didn't think your post actually was concerned with those either.
      • SkyBelow 7y ago
        Sure, but that situation has no bearing on reality if one looks at the actual numbers.
    • pytester 7y ago
      If Paul parasitically extracted wealth from Peter (e.g. by charging sky high rents on the san francisco flat he inherited) then taking some of it back wouldn't be the worst thing ever.
  • quantguy11959 7y ago
    No it won’t, most companies no longer offer pensions for new employees and instead offer a 401K plan. The pension problem will go away over time.
  • marcosdumay 7y ago
    Yes, that's the real solution here. If there aren't investment opportunities, redistributing some more money will create them.
• frankbreetz 7y ago
  "The bonds of many other countries have actually gone negative, with lenders paying for the privilege of lending to governments for years." Do people actually invest in these bonds? Why would they not put it in a safer, positive returning, investment like US bonds?
  • Scarblac 7y ago
    Presumably they expect the dollar to decrease in value, leading to the same thing.
  • danieltillett 7y ago
    I don’t think too many people invest in these bonds, but banks that are forced to hold government bonds do.
  • Armisael16 7y ago
    If your pension doesn’t pay out in dollars (ie, you’re a German pension) then you’re exposed to swings in the dollar-euro exchange rate. If the Euro appreciates relative to the dollar but you’re holding T-bonds, you lose money.
  • rjtavares 7y ago
    If you deal in Euros, US bonds are in no way safe.
  • calpaterson 7y ago
    One reason is that many funds have mandates that require them to (for example) stay in EUR and have x% in government bonds.
  • antientropic 7y ago
    Of course people invest in those bonds. After all, if they didn't, those countries would have to offer a higher interest rate.
  • onaraft 7y ago
    The gist of it is that if you have 1, 10, or even 100 thousand dollars in cash, sure you can sit that in your bank and probably earn ~0% interest, but at least it's not negative. But if you have 100M in [edit: $your_native_currency], you aren't going to put it in a retail bank account, you're not going to put it in your mattress, and so you have only a few options: 1. Stocks/derivatives: If you were holding cash already, you're probably not comfortable with the risk profile of any of this stuff 2. Bonds - this exposes you to the slight negative interest rate 3. Corporate bank account - you might be able to avoid a negative interest rate here as well, but only because you're passing the buck (literally) to the bank, who then has to pick 1 or 2. 4. Actually use the money yourself, in your business. The whole point of the NIRP (negative interest rate policy) is to push people to pick 3 or 4, and if 3, then for the banks to pick 1 or 4. I just reread your question, and realized I didn't fully answer it. Investing in foreign bonds exposes you to exchange rate risk. I was sorta hand-waving it into 1 since it's basically like doing both bonds and forex. Not very appealing if your risk appetite is "preferably cash or govt bonds". I feel obligated to include a disclaimer that this isn't investment advice and that monetary policy is immensely complicated and this is just the high-level thinking of the point of NIRPs.
• Cthulhu_ 7y ago
  I'm no expert but it seems the 'cause' of a lot of problems right now - the one mentioned in this article, but also climbing housing prices - are caused by low and negative bond interest rates. Who sets these interest rates? Why are they being kept low? They seem to have such a big influence on the economy right now, driving it towards riskier investments - I mean my bank's savings account, which IIRC is tied to government bond interest rates and (also historically low interest) mortgages, is pretty much zero so I've moved some of my funds into (riskier) investments. I mean I don't really want to be doing that but right now, putting money in savings and keeping it is basically costing me 2-3% of its value a year due to inflation.
  • jryan49 7y ago
    They're keeping the rates low to prop up business borrowing and the stock market it seems.
  • relix 7y ago
    The latter part of your first paragraph is the answer to the first part.
  • Bombthecat 7y ago
    In germany we will enter soon zero interest for house credits... Where that will lead to...
    • derriz 7y ago
      It's happened in Denmark already - https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-year-mortgages-with-negative-interest-rates.html https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-y... It feels very weird.
    • Ididntdothis 7y ago
      It will accelerate the housing price bubble even more. This doesn’t seem a very desirable outcome.
      • 7y ago
• lr4444lr 7y ago
  I don't think so. The vesting contribution terms can lengthen, the payouts can decrease, and the withdrawal minimum ages can start later. Sure, some funds that are ailing will be in trouble, and there may be a yearning for the good ol days, but "Destroyed"? C'mon: these are govt. jobs with mandated contributions from people who are risk averse and have few better employment options.
  • CinchWrench 7y ago
    Not all pensions are public employee pensions! There are a lot of machinists and truckers out there who are already feeling this pinch.
• vnchr 7y ago
  A response to “The Next Recession Will Destroy Millennials” to include the corresponding destruction of Boomers too... I find this language and the agenda of fear to be concerning.
  • somebodythere 7y ago
    Millenials are more likely to be the ones destroyed. The government will bail out the pensions and millenials (current and future workers) will pay the tax. This is the consequence of being underrepresented in government.
    • vnchr 7y ago
      I will not be destroyed by a recession.
• vxxzy 7y ago
  Isn’t this by design? When interest rates lower, institutions are forced to find yield elsewhere. Don’t central banks lower interest rates to make saving less attractive?
  • smt88 7y ago
    Pension funds != savings Pension funds are intended to be large pools of money invested wisely, ensuring that retirees from a certain employer can be paid what they were promised. Changing interest rates would affect how the fund managers invested the money (in theory). It's unlikely that pension fund managers can recession-proof their investments, partly because recessions by definition are harmful to almost everyone who is holding securities when they begin.
• imtringued 7y ago
  This appears to be complete mismanagement of pension funds. When people manage their private funds they reduce their exposure to risky investments like stocks as they reach retirement age. Public pension funds should behave identically and eat a small yield loss in exchange for lower risk.
  • onion2k 7y ago
    Pension funds aren't trying to make a profit. They need the ~7% yield to cover the cost of paying people's pensions decades in to the future. Without that return the fund would collapse under the forces of inflation, increased pay outs to more people as we live longer, and the fund itself shrinking because it's not covering its costs.
  • pytester 7y ago
    This mismanagement was somewhat inevitable as yields decreased. There's too much cash (because of wealth inequality) chasing too few yield bearing assets. Assumptions that were made about the level of yield that could be achieved safely before the crisis simply don't apply today.
  • throw0101a 7y ago
    Except that as an individual you are have shorter time line than pensions: you'll be dead in ~20 years after you retire. Pensions have timelines of >20 years, and so they must have higher returns to handle the needs of those coming after you. If you do a search you'll find a number of people arguing that having a 60/40 portfolio may not be enough post-retirement, and that if you want to not run out of money, then something like a 60/30 or 80/20 equity-bond mix may be necessary. In the past bond rates were often >4%: good luck finding that (unless you want to buy Brazil, Mexico, or Russia bonds). * https://tradingeconomics.com/bonds https://tradingeconomics.com/bonds * https://www.bloomberg.com/markets/rates-bonds https://www.bloomberg.com/markets/rates-bonds
• bryanrasmussen 7y ago
  This seems U.S centric though, I wonder how other parts of the world will do with pensions.
  • leokennis 7y ago
    In The Netherlands: - Pensions are already "squeezed" (people get less pension than they originally were told they would) - The age you can retire was alway 65, now it's 67 and growing with life expectancy (every year of life expectancy = 8 months later retirement) - Pension funds want/lobby for more lenient rules so they need to have less cash on hand...not sure if they'll get it
    • brnt 7y ago
      The Dutch Planning Bureau publishes graphs of net-benefits people on average may get out of the pension system, and those numbers as function of your birthdate are quite staggering: https://tweakers.net/ext/f/YflHE563fficH8f0MAv7zIFj/full.jpg https://tweakers.net/ext/f/YflHE563fficH8f0MAv7zIFj/full.jpg
    • NotSammyHagar 7y ago
      8 months later retirement per year of life expectancy sounds like a lot but this is hard for me the visualize. because life expectancy isn't going up that fast, right? It's similar to how I see social security in the us not being adequately funded. We only need to increase funding a little bit to make it solvent. We could do some easy things like increase the cap on income that gets taxed (s.s. has max payment amount, and the tax that pays for it is a percentage of income but there's a cap on how much income they tax, so just increase that income tax cap a bit).
  • MandieD 7y ago
    Germany has outright said that the public pension (equivalent of US Social Security) will be have to be cut significantly if the contribution rate isn't increased, and the full retirement age has already been raised from 65 to 67, with some discussion about raising it even further to age 69. Germans can elect to start receiving their public pensions as early as 63, with a proportional reduction in monthly benefit. One of the fundamental problems for all pension funds, public and private, is that with longer life expectancy comes markedly increased length of pension receipt. Germany has seen a doubling from about 10 to 20 years of average pension receipt since WWII.
• paulpauper 7y ago
  People have been making these sort of doom and gloom predictions for decades, whether about debt, inflation, or bubbles, and given their poor track record can be safely discarded. For every event like the 2008 they get right, they get a 50 or more predictions wrong.
  • bregma 7y ago
    Economists have predicted 8 of the last 3 recessions.
    • selectodude 7y ago
      Economists have a good grasp of the underlying factors that cause recession, the one thing they can’t model is human economic exuberance, which is why they always predict recessions when they don’t happen. And then when they do happen they’re so much worse than anybody would have thought.
  • dangerface 7y ago
    You might not be able to predict the year fair enough, but when all the trends point to a recession you can make an informed prediction.
  • DennisP 7y ago
    There's a difference between pointing out a risk, as this article does, and making a prediction.
  • EasyTiger_ 7y ago
    I've been hearing things like this regularly since 2016, some of it on Hacker News. It's caused definite stress in the past and I actually get a bit angry when I see stories like this now - and regard it as clickbait.
    • deleted 7y ago
      [deleted]
  • i_am_proteus 7y ago
• bhouston 7y ago
  There will also be a decline in house prices if demographics trends continue. This is also a store of "wealth" that many are counting on. This is more of a macrotrend though.
  • somebodythere 7y ago
    There is a bullish macrotrend in housing. Married 35+ year olds are the main demographic buying single-family homes. Unless, of course, you are referring to the macrotrend in which we are all swallowed up by the sun.
    • thfuran 7y ago
      That just makes my house a more attractive location for solar energy generation.
• lexpar 7y ago
  Does anyone have a read on the rigor and ideological slant of the blog? I've flipped through a couple posts and find the content easy to follow (I have no economics background). However, I haven't found any meta commentary on the blog or information about the author (Joshua Konstantinos).
  • dougweltman 7y ago
    Looks like the author posted it here.
• Neil44 7y ago
  Pension funds tend to be distributed across local and global risks and should be actively managed and moved around in response to global events. The article speculates that pension funds will be left in high risk pots into the next resession and will then suffer losses. Lot of 'ifs' in that chain of reasoning.
• patio11 7y ago
  If this subject interests you, the Pension Tsunami blog has 15 years of posts about the details.
• chrisgd 7y ago
  Cassandra is apropos
• apexalpha 7y ago
  So this triggered me to log into my pension fund website. Which I almost never do. My fund's 2018 report says the allocation is as follows: - 37,4% stock - 50,4% fixed (bonds) - 10% real estate - etc.. (derivatives, cash) The past 2 years the news has also been dominated by the law that governs pension funds in my country. Ever since the ECB cut rates pensions have been cut or been close to it. So it seems we don't allow funds to go riskier, as the article describes. In stead the law forces funds to take their losses now, and not postpone them to a next generation. And during the '08 crisis I remember a talk from a fund manager that said crises don't matter that much for funds. Since they are all focused on the long term the stock will recover anyway and the best thing to do in a crisis is to buy more stock. What funds automatically do since people can't stop contributing. So the key point in the article seems to be this: >"There is one other key reason that public pension funds have transitioned into riskier assets. States have passed laws exempting state government pension plans from the standards that private pension plans are held to. These public pension plans are permitted to use generous assumptions about risk that are not permitted in the private sector. So, while public pensions have moved into objectively riskier assets, they haven’t been forced to account for that risk." So it seems a lack of regulation is the big problem, not economic downturn every now and then.
  • conanbatt 7y ago
    > So it seems a lack of regulation is the big problem, not economic downturn every now and then. Lack of regulation of itself. Maybe the problem is that government shouldn't have people's retirement funds to manage.
    • mkr-hn 7y ago
      Who should manage them?
      • kome 7y ago
        they shouldn't invest in the market in the first place. that's what still happens in europe in most of the countries.
• sleepysysadmin 7y ago
  There isn't going to be some sort of general rule on this. Some pension funds deal entirely in government issue bonds that won't be harmed. Other funds are operated similar to how Warren Buffet operates; the pension fund literally buys major infrastructure. So you certainly can't blanket statement this one. Furthermore, every major country passed in exactly the same year(2014) that pension funds can now cut benefits to stay solvent. This was done by Obama, Harper in Canada, and really no political partisanship at all; right wing and left wing did this across the high income countries. http://www.pensionrights.org/issues/legislation/summary-pension-cutback-provisions-multiemployer-pension-reform-act-2014 http://www.pensionrights.org/issues/legislation/summary-pens... So fundamentally the author is wrong. Pension funds arent going to be destroyed. The pensioners are the ones who will be taking cuts. Grandpa is going back to work; even though he still has a pension.
  • dragonwriter 7y ago
    So, your argument against the articles claim that boomers will be hurt because of the impact on pensions is that it's wrong because pensions will just cut their benefits? I'm not sure that qualifies as the article being “wrong” so much as not being completely clear on why it's thesis is correct.
    • sleepysysadmin 7y ago
      >Pension Funds Are Going To Be Destroyed In The Next Recession https://www.dictionary.com/browse/destroyed https://www.dictionary.com/browse/destroyed The article I read is arguing that Pension funds will no longer exist. Pension funds wont be going anywhere.
      • dragonwriter 7y ago
        The hyperbolic use of “destroyed” to mean adversely impacted, including in performing a thing’s intended function is so common than it may even exceed literal use of the term. The thesis of the article (as is usually the case) is not the headline, but (as laid out in the last two sentences of the first paragraph) that the impacts of the e next recession won't be limited to Millenials but born heavily by boomers through the impact on pensions. (Though, I would argue, it would also literally destroy pension funds, but as a more distant effect of causing them to be perceived as not delivering value, but that's entirely outside the focus.)
• lota-putty 7y ago
  Today's billionaires believe they earned their wealth & deserve to keep all of it. All they did is invent shrewd ways to leech from the society artfully without moral responsibility. In a way they're worse than average kings/queens from history. https://assets.weforum.org/editor/large_P5jdSz3P6OAUa75Orq2Lr2n--s4b-JHWiU4eBssSTd4.png https://assets.weforum.org/editor/large_P5jdSz3P6OAUa75Orq2L...
  • blaser-waffle 7y ago
    The average king of queen thought they have a literal Divine Right from God, and were absolutely willing to enforce that with violence and suppression. There are a lot of good reasons to hate on the ruthless capitalist business class, but don't pretend that actual monarchs were somehow more benevolent. There were a lot of revolutions and civil wars in history -- for a reason.
• NTDF9 7y ago
  How about we just abolish fractional reserve banking? Fractional reserve system causes credit to grow with booming population but causes deflation when population/production declines. The root cause of all economic problems are man made. Lets fix the root cause because its totally in our control.
  • Nasrudith 7y ago
    Isn't that how it should be essentially given currency is a medium of value exchange? If the production grows shouldn't credit grow with it for reasons similar to why national debt is listed as GDP percentage?
    • NTDF9 7y ago
      Not when currency is also a medium of wealth storage. Currently, when deflation happens, the rich don't suffer losses immediately. Instead they fire their works and reduce investments. So the poor are on the streets or have to suffer first. The rich may or may not lose later (they don't lose because by then they get bailed out or the tide turns). If we're truly going to use currency as a medium of exchange then we have no choice but to let the rich suffer, perhaps they suffer first.
      • selectodude 7y ago
        that assumes that currency was ever intended on being a store of wealth, which it really wasn’t.
        • NTDF9 7y ago
          But it is. Anything that has to be earned and saved over time to make a purchase is a store of wealth. Think saving cash(or putting in bonds) for a down payment.
          • selectodude 7y ago
            Bonds are an asset class. Cash is not.
• BubRoss 7y ago
  Are most people able to take the money out of their pension early by just accepting some penalties? That could mean a sort of run on pension funds if people get spooked and pensions are under funded.
  • dragonwriter 7y ago
    > Are most people able to take the money out of their pension early by just accepting some penalties? Not really. I think a fairly typical pension plan you can withdraw funds from only if you leave employment covered by it, and the refund is typically of your contributions plus interest (not employer contributions made on your behalf.) Note that this (and the article) uses “pension” narrowly to mean “defined benefit retirement plan”, not broadly to mean “retirement plan, including defined contribution plans as well as defined benefit”. Defined contribution plans can usually be withdrawn from at a penalty more freely.
• awinder 7y ago
  I had a whole thing written up, but in the interest of brevity, maybe covering my ass a little, but balancing some public interest for people who read these articles: 1. Cassandra Capital is "somehow" getting to the top on HN quite frequently (this is not true of other communities I participate in) 2. Pretty much everything in this comment chain lines up with my experience https://www.reddit.com/r/investing/comments/cz3w52/pension_funds_are_going_to_be_destroyed_in_the/eyvweep/ https://www.reddit.com/r/investing/comments/cz3w52/pension_f... 3. I'm no longer clicking through on Cassandra Capital articles and maybe some people here who care about how what they read influences financial decisions should also do some background research
  • joshuafkon 7y ago
    Hi, I’m Joshua Konstantinos the author of this post. I’m sorry if you don’t like the quality of my article. But I felt I should respond to the insinuation that I’m doing something underhanded to “somehow” get to the top of hacker news. I did absolutely nothing to get to the top other than submit the post this morning. I have been working on my book as a passion project for two years. It is very unlikely that I will ever recoup the money I spent writing it, printing copies, researching etc. Now that I’ve finished my book I’ve been posting articles on economics and geopolitics because it’s a topic I enjoy. I don’t have ads on my site, and honestly I probably lose money on hosting costs. I have had some success on hacker news and Reddit which has been a pleasant surprise - but Cassandra Capital is just me writing about what I enjoy writing about.
    • dev1n 7y ago
      I will say that people get hell-banned for seemingly self-promoting on HN. Might be good to mix up your submissions with other articles you find interesting, so it doesn't appear as though you are only posting your own writings.
      • joshuafkon 7y ago
        I have submitted a few news article that I've found interesting (from Bloomberg etc) that have also done well on here lately. But you're right. I will make an effort to mix up my submissions! Thanks!
• bryanlarsen 7y ago
  I expect inflation to destroy pensions and retirement savings. We're heading towards a time when there are going to be only 2 workers for every retiree. We're going to need a lot of people to take care of retirees, and that's a crappy job that most won't want to do. Currently such jobs pay poorly but I expect them to have to crank those salaries a lot to fill them.
  • tryptophan 7y ago
    This is the situation in Japan, and they have lower inflation than we do. Younger people are just told to suck it up, and they do, as their standard of living drops. USA is much more freindly to low skill immigration too, which would reduce the need for raising wages for these jobs.
  • noonespecial 7y ago
    That's not true globally. Even Japan is starting to look at their border gates and go "hmmmmm".
• mitchtbaum 7y ago
  sorry, Cassandra I misunderstood
• aazaa 7y ago
  In a nutshell: 1. interest rates on government bonds, perceived as the safest asset class, have fallen to historic lows, even below zero in many countries 2. pension funds' expected rate of returns have barely budged since the 1970s (7-8%) despite the fact that interest rates have dropped from double digits to below zero in many cases 3. to make up the loss of yield, pension funds have turned to riskier assets such as stocks 4. fueling the fire, state regulations have been relaxed to allow these public pension funds to invest in risky assets 5. since the 2008 crisis pension funds have been underfunded - they take in too little money to be self-sustaining 6. it's becoming increasingly clear that pensions can't "grow out of" their underfunded positions 7. having loaded up on risky assets, pensions will face large declines in the next recession as stock markets deflate The joker in the deck is how the pension funds will react to a declining stock market. Their only viable option would appear to be government bonds. A collective flight into bonds would further depress interest rates. Falling interest rates produces capital gains on bonds, which attracts still more investors, driving rates further down. And so on. Flight to bonds on a large scale driven by pensions would also accelerate stock market declines, making bonds that much more attractive. Having broken the zero interest barrier, there appears to be no bottom to interest rates anymore. The lack of a bottom opens up some very bizarre scenarios.
  • davedx 7y ago
    How will negative interest rates work in practice? Will they always be confined to bonds, or will they spill over into interbank lending or even retail debt?
    • throw0101a 7y ago
      Generally speaking, we don't know. The financial sector has never had been in this situation before. > While the ECB wants to spur people to invest, there’s concern that the banks will face mass withdrawals if they introduce negative interest rates for retail clients. * https://www.bloomberg.com/news/articles/2019-08-25/germany-in-uproar-as-negative-rates-threaten-saving-obsession https://www.bloomberg.com/news/articles/2019-08-25/germany-i... > Jyske Bank A/S this week said it will charge Danish depositors with 7.5 million kroner ($1.1 million) or more in their accounts; earlier this month, UBS Group AG halved the level at which its annual 0.6% fee kicks in to 500,000 euros ($560,000). * https://ca.finance.yahoo.com/news/negative-rates-coming-savings-050005475.html https://ca.finance.yahoo.com/news/negative-rates-coming-savi...
• epx 7y ago
  Negative interest rates and cash-hoarding companies signal that there is not enough investment opportunities in the world anymore, so it became impossible to secure a retirement income through savings alone. That's it. The source of retirees' income will have to change.
  • ryandrake 7y ago
    Not enough investment opportunities or not enough willingness/creativity to invest? I can’t believe that these billionaire companies and individuals literally searched the entire globe and concluded there is not a single investment opportunity that would produce a risk-adjusted return greater than 0%!
• cc439 7y ago
  Pension funds have been allowed to decay so far in such an unseen manner that there is now a universal aversion to peering behind the curtain because the naked truth is too terrible for anyone to process. That there are only a handful of small, independent journalists/bloggers willing to touch the subject, as is the case with this article, is a sign that there is fear at the highest levels of a national conversation on the issue which would be born from honest reporting by mainstream sources. The ramifications that stem from exposing the pension system as utterly broken beyond repair would threaten to topple the whole house of cards propping up modern society. CalPERS in particular has become subject to multiple mini-scandals recently. The first of which is the competency of their latest CEO and the thoroughness of their hiring practices (1). Even the most charitable interpretation of her resume and skillset would arrive at the conclusion that Marcie Frost is a figurehead/cheerleader type CEO at best. Combine that with the recent announcement of Yu Ben Meng's return to CalPERS as CIO and there is certainly room for concern (2). Meng left CalPERS in 2015 to serve as deputy chief investment officer of China's $3.2 trillion State Administration of Foreign Exchange. We are now facing a situation where the nation's largest public pension is managed by a man considered so trustworthy by the country we are currently waging a trade war against that they placed him in charge of their largest capital fund. Even if everything is financially and legally above board, this kind of tone-deafanagemeny by the CalPERS board does not induce great confidence in their leadership or stewardship abilities. (1): https://www.nakedcapitalism.com/2018/08/marcie-frosts-shoddy-resume-alone-reason-not-hire-calpers.html https://www.nakedcapitalism.com/2018/08/marcie-frosts-shoddy... (2): https://www.pionline.com/article/20190204/PRINT/190209951/new-calpers-cio-ready-to-make-nimble-dynamic-investing-shifts https://www.pionline.com/article/20190204/PRINT/190209951/ne...
• ohiovr 7y ago
  I want an interest only mortgage when rates go negative.