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I read the article but can't make any conclusion from it. Someone can explain in simpler terms?

by betaby 8mo ago

bluGill 8mo ago
The more people trust their pension system the less they invest their own money.
- carefree-bob 8mo ago
  When economists were worried about "savings gluts", to decrease savings demand they advocated for things like government funded pensions. If you read some of the literature out on China and their anomalous savings rate (household consumption is only 40% of national income) studies show that the lack of a social safety net exacerbates the problem and savings rates decline once you have the safety net. One difference they noticed was the dramatic decline in savings rates as you go from rural to urban areas. In urban areas you have a different social safety net -- a government pension, but in rural areas the pension is optional and savings rates are dramatically higher. Because much social spending in China is handled at the provincial or city level and there are differences, it is a natural laboratory for these types of studies. It's also why you need a citizenship document when trying to "emigrate" into a city or different province, and there are internal controls that limit what city you can be registered in, which also affects things like car registration, real estate purchases, and access to local education in the city for people that are considered "migrants" - e.g. they physically live in the city but do not have enough points to be registered there.
- drewmate 8mo ago
  I feel this in my own life. From well before my working years I had a message ingrained into me: “Do not count on social security to be around when you retire.” It’s probably not all so drastic as that, but for me (and many other American millennials) my financial ethos has been squarely centered on saving and making hay while the sun shines. Compound that over 300M people and multiple generations and you do get overly deep and inflated capital markets.
  - bluGill 8mo ago
    As genX this was my experience too. The numbers have been clear for decades, SS is unlikely to be a great option by the time anyone working today gets it. (including people who retire in a month). Generally I think there will be SS when I'm old - but it will barely be enough to live on. I'm trying to save money so I can not only eat but also do other things I enjoy [that cost money] when I retire.
jdasdf 8mo ago
>Public pensions and family benefits may seem old-fashioned compared with asset-based solutions. But they provide security without locking households into markets, without generating trillion-dollar investment pools, and without driving asset inflation that prices younger generations out of housing and wealth. Sometimes, the non-assetising path may simply be better. It's an obvious propaganda post intended to demonize the financial markets, and promote unsustainable social security policies.
- toomuchtodo 8mo ago
  If the options are pensions or self investment, how is one sustainable and the other isn’t? The investment dollars in scope are similar, with pensions being better managed than your average human would do.
  - bluGill 8mo ago
    > with pensions being better managed than your average human would do. Only if they are. Some pensions are well managed. Some are not. Some seem well managed for years, but in fact they are not. Some have been well managed for a long time, but someone incompetent gets in power. Can you tell the difference. Oh, and if you can tell the difference, can you convince everyone else and thus get this fixed? Or will voters be happy with the mismanagement because it is returning great results now on low investment leaving more money to spend on other things now?
    - ryandrake 8mo ago
      I guess the question is: Will the average person 1. choose to save and 2. invest that savings better than the average pension manager? I know, I know, everyone on HN is an investing genius and consistently beats the S&P 500, but we're talking average joe.
      - SpicyLemonZest 8mo ago
        In principle defined contribution plans should be a good way to split the difference, although I recognize that it's a lot harder politically to make them mandatory than it is for pension contributions.
rawgabbit 8mo ago
He seems to be saying that Funded Pensions like 401k can lead to asset inflation such as high housing prices. While public pensions which are pay as you such as Social Security do not lead to financialization and asset bubbles. It was a tough read. He should tighten his word choice.
- megaman821 8mo ago
  This seems like an incomplete analysis since many countries with pay-as-you-go schemes borrow money to fund them sometimes, which contributes to general inflation.
appplication 8mo ago
It’s not just you, I also read it and had little idea what the central thesis was. I see there are a number of points made but the author could do better job bringing it all together.
- someguydave 8mo ago
  The author is using fancy words to say that communism is good
  - hiimkeks 8mo ago
    Parent is using normal words to say they have no idea what communism is
marcosdumay 8mo ago
Governments pick the size of their country's financial markets when they decide what parts of society get traded in those markets. Pension and healthcare are the two most obvious pieces governments can decide to "make it themselves" or "let companies solve it", and the later option creates the pieces of paper that get traded in financial markets and "frees" money to buy those papers. And the article ends with the obvious notice that "large markets" is not something good by itself.

I read the article but can't make any conclusion from it. Someone can explain in simpler terms?

by betaby 8mo ago

I read the article but can't make any conclusion from it. Someone can explain in simpler terms?

bluGill 8mo ago

The more people trust their pension system the less they invest their own money.

carefree-bob 8mo ago
When economists were worried about "savings gluts", to decrease savings demand they advocated for things like government funded pensions. If you read some of the literature out on China and their anomalous savings rate (household consumption is only 40% of national income) studies show that the lack of a social safety net exacerbates the problem and savings rates decline once you have the safety net. One difference they noticed was the dramatic decline in savings rates as you go from rural to urban areas. In urban areas you have a different social safety net -- a government pension, but in rural areas the pension is optional and savings rates are dramatically higher. Because much social spending in China is handled at the provincial or city level and there are differences, it is a natural laboratory for these types of studies. It's also why you need a citizenship document when trying to "emigrate" into a city or different province, and there are internal controls that limit what city you can be registered in, which also affects things like car registration, real estate purchases, and access to local education in the city for people that are considered "migrants" - e.g. they physically live in the city but do not have enough points to be registered there.
drewmate 8mo ago
I feel this in my own life. From well before my working years I had a message ingrained into me: “Do not count on social security to be around when you retire.” It’s probably not all so drastic as that, but for me (and many other American millennials) my financial ethos has been squarely centered on saving and making hay while the sun shines. Compound that over 300M people and multiple generations and you do get overly deep and inflated capital markets.
- bluGill 8mo ago
  As genX this was my experience too. The numbers have been clear for decades, SS is unlikely to be a great option by the time anyone working today gets it. (including people who retire in a month). Generally I think there will be SS when I'm old - but it will barely be enough to live on. I'm trying to save money so I can not only eat but also do other things I enjoy [that cost money] when I retire.

jdasdf 8mo ago

>Public pensions and family benefits may seem old-fashioned compared with asset-based solutions. But they provide security without locking households into markets, without generating trillion-dollar investment pools, and without driving asset inflation that prices younger generations out of housing and wealth. Sometimes, the non-assetising path may simply be better. It's an obvious propaganda post intended to demonize the financial markets, and promote unsustainable social security policies.

toomuchtodo 8mo ago
If the options are pensions or self investment, how is one sustainable and the other isn’t? The investment dollars in scope are similar, with pensions being better managed than your average human would do.
- bluGill 8mo ago
  > with pensions being better managed than your average human would do. Only if they are. Some pensions are well managed. Some are not. Some seem well managed for years, but in fact they are not. Some have been well managed for a long time, but someone incompetent gets in power. Can you tell the difference. Oh, and if you can tell the difference, can you convince everyone else and thus get this fixed? Or will voters be happy with the mismanagement because it is returning great results now on low investment leaving more money to spend on other things now?
  - ryandrake 8mo ago
    I guess the question is: Will the average person 1. choose to save and 2. invest that savings better than the average pension manager? I know, I know, everyone on HN is an investing genius and consistently beats the S&P 500, but we're talking average joe.
    - SpicyLemonZest 8mo ago
      In principle defined contribution plans should be a good way to split the difference, although I recognize that it's a lot harder politically to make them mandatory than it is for pension contributions.

rawgabbit 8mo ago

He seems to be saying that Funded Pensions like 401k can lead to asset inflation such as high housing prices. While public pensions which are pay as you such as Social Security do not lead to financialization and asset bubbles. It was a tough read. He should tighten his word choice.

megaman821 8mo ago
This seems like an incomplete analysis since many countries with pay-as-you-go schemes borrow money to fund them sometimes, which contributes to general inflation.

appplication 8mo ago

It’s not just you, I also read it and had little idea what the central thesis was. I see there are a number of points made but the author could do better job bringing it all together.

someguydave 8mo ago
The author is using fancy words to say that communism is good
- hiimkeks 8mo ago
  Parent is using normal words to say they have no idea what communism is

marcosdumay 8mo ago

Governments pick the size of their country's financial markets when they decide what parts of society get traded in those markets. Pension and healthcare are the two most obvious pieces governments can decide to "make it themselves" or "let companies solve it", and the later option creates the pieces of paper that get traded in financial markets and "frees" money to buy those papers. And the article ends with the obvious notice that "large markets" is not something good by itself.