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> This is because individual investments (retirement plans and pensions, the largest holders of equities) demand that growth. I don't disagree with you but it

> This is because individual investments (retirement plans and pensions, the largest holders of equities) demand that growth. I don't disagree with you but it's much worse in the EU, where mandatory contribution to the state for pension funds are gigantic ponzi schemes: the money wasn't invested in equities but directly spent. Now most EU countries are heavily indebted and simply shall soon have no way to honor the pension they promised their citizens. Greece already (partially) defaulted on its public debt a few years ago. More countries shall follow. France is in a particularly bad position at the moment, for example. Now there are private, optional, pension funds in the EU and citizens have to opt-in to these and these do put their funds in equities etc. Still beats a full-on ponzi, if you ask me.

iamnothere 9mo ago
Oh yes, same with Social Security in the US. I think we will be able to keep it going a little longer than EU pensions, but short of a miracle (or massive inflationary printing) there’s no way it will stay afloat.
- dh2022 9mo ago
  How would massive inflationary printing solve the fact that at some point in the future there will not be enough people working to support people in retirement? (I think inflation would make the problem worse, as the current amount of money in the Social Security Fund would lose its value. But I could be wrong.)
  - iamnothere 9mo ago
    Printing could fund entitlements at the cost of diluting purchasing power for everyone (including retirees). But Social Security is indexed to inflation, so it would pay out more as long as the government chooses to fund it through whatever means are available. Effectively this would continue to fund retirees while taxing all nonretirees, especially those who don’t own assets. Not a great situation and it would have political consequences, but it is theoretically possible. I think we have enough people to theoretically support retirees (Japan does it with worse TFR), the problem is that declining relative wages makes it politically difficult, as lower earners would share a disproportionate burden. And retirement is just one issue of many, we are trying to run a giant resource-hungry country on a service economy. We’re only able to get away with this by using our aging military resources to force other countries to accept our role as a global middleman. It isn’t sustainable.
    - dh2022 9mo ago
      I now understand what you mean. This is how post-WW1 Germany tried to pay its WW1 "fines" which were pegged to gold [0]. The result was hyper-inflation - and 2 years later when this scheme was thrown out the currency stabilized. Most likely the same would happen in your scenario - the retirees would come ahead for a while, but only for a short time. So I do not think this is a solution for retirees (no matter their large political power) These days currencies have no real assets behind them. One cannot expect to be able to purchase real goods / services indefinitely with a fictional construct (fiat currency) [0] https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
      - iamnothere 9mo ago
        It’s more complicated than that, as Germany’s punitive war debt was designed to cripple it and it didn’t have many options. It’s actually fairly difficult to create hyperinflation without being trapped in an extreme situation. But I agree that it’s generally a bad idea to put yourself at risk of it. Fiat isn’t necessarily backed by nothing, that’s a misconception. It’s backed by the strength of the underlying economy, the perceived value of claims on the nation’s resources and services, the political stability of the nation, and the need to hold that currency for trade. The problem with fiat is that when those things are in decline, the lack of hard assets can cause a rapid devaluation, as the “invisible assets” backing the currency are now devalued. This compounds the decline.
        dh2022 9mo ago
        Ok ok. I can’t wait to see how 2026 and 2027 will shake out. Trump’s choice to replace Jerome Powell will drive short term interest rates to zero because, among other things, US pays around $1 trillion / year in interest for its debt. Getting these rates to 0 will require the Fed to print massive amounts of USD. Let’s see then how the USD is backed by something other than thin air. (BTW - lots of countries managed to achieve hyperinflation: Zimbabwe, Venezuela, Russia and my home country of Romania in the 90s. It is not that difficult)

iamnothere 9mo ago

Oh yes, same with Social Security in the US. I think we will be able to keep it going a little longer than EU pensions, but short of a miracle (or massive inflationary printing) there’s no way it will stay afloat.

dh2022 9mo ago
How would massive inflationary printing solve the fact that at some point in the future there will not be enough people working to support people in retirement? (I think inflation would make the problem worse, as the current amount of money in the Social Security Fund would lose its value. But I could be wrong.)
- iamnothere 9mo ago
  Printing could fund entitlements at the cost of diluting purchasing power for everyone (including retirees). But Social Security is indexed to inflation, so it would pay out more as long as the government chooses to fund it through whatever means are available. Effectively this would continue to fund retirees while taxing all nonretirees, especially those who don’t own assets. Not a great situation and it would have political consequences, but it is theoretically possible. I think we have enough people to theoretically support retirees (Japan does it with worse TFR), the problem is that declining relative wages makes it politically difficult, as lower earners would share a disproportionate burden. And retirement is just one issue of many, we are trying to run a giant resource-hungry country on a service economy. We’re only able to get away with this by using our aging military resources to force other countries to accept our role as a global middleman. It isn’t sustainable.
  - dh2022 9mo ago
    I now understand what you mean. This is how post-WW1 Germany tried to pay its WW1 "fines" which were pegged to gold [0]. The result was hyper-inflation - and 2 years later when this scheme was thrown out the currency stabilized. Most likely the same would happen in your scenario - the retirees would come ahead for a while, but only for a short time. So I do not think this is a solution for retirees (no matter their large political power) These days currencies have no real assets behind them. One cannot expect to be able to purchase real goods / services indefinitely with a fictional construct (fiat currency) [0] https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
    - iamnothere 9mo ago
      It’s more complicated than that, as Germany’s punitive war debt was designed to cripple it and it didn’t have many options. It’s actually fairly difficult to create hyperinflation without being trapped in an extreme situation. But I agree that it’s generally a bad idea to put yourself at risk of it. Fiat isn’t necessarily backed by nothing, that’s a misconception. It’s backed by the strength of the underlying economy, the perceived value of claims on the nation’s resources and services, the political stability of the nation, and the need to hold that currency for trade. The problem with fiat is that when those things are in decline, the lack of hard assets can cause a rapid devaluation, as the “invisible assets” backing the currency are now devalued. This compounds the decline.
      - dh2022 9mo ago
        Ok ok. I can’t wait to see how 2026 and 2027 will shake out. Trump’s choice to replace Jerome Powell will drive short term interest rates to zero because, among other things, US pays around $1 trillion / year in interest for its debt. Getting these rates to 0 will require the Fed to print massive amounts of USD. Let’s see then how the USD is backed by something other than thin air. (BTW - lots of countries managed to achieve hyperinflation: Zimbabwe, Venezuela, Russia and my home country of Romania in the 90s. It is not that difficult)