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.
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.
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.
There are plausible reasons to decrease populations in regions or entire countries. With climate change getting more serious, we'll soon start having to move populations away from flood prone areas or areas with increasing desertification. Many of those towns and cities started their own infrastructure projects paid with bonds that assume a certain population, and thus tax base, growth.
Younger generations, for several reasons from despair about ecological future to high costs of living to stagnant wages, are opting to not have children. Other countries, like Japan, have struggled economically because of declining birth rates.
If we (the US) had a more open borders policy with an easier path to citizenship, we could use immigrants to boulster our population and tax base.
With migrating and shrinking populations, I can't think of other economic instruments to pay for local infrastructure projects that have routinely been paid with long-term municipal bonds.
There is zero incentive for younger people to engage in that if not for complete dependence within such a system.
If that is the outlook, no economic instrument can be the solution since the way the economy is driven is the problem itself.
If you generalize your strategy to a global level you will end up in the exact same spot.
Sustained economic growth is a product of the Industrial Revolution so this is only true if you ignore almost all of human history.
> There are no theories of at scale planning for a future has less stuff and fewer people and no growth or even shrinkage.
On at least one interpretation this is how total war usually works in industrial societies. The Roman Empire abandoned long settled territory full of Roman citizens on more than one occasion, Britain, Dacia, so dealing with economic contraction is also far from unknown historically, even for well developed states with a literate culture and bureaucracy.
> 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.
You radically underestimate the proportion of the population who would be basically ok in a world without defined benefit pensions or one where they don’t exist at all. The professional classes would be just fine if they had to arrange their own retirements instead of having financial intermediaries do it.
> 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.
Nothing has been dismantled yet. I’m not aware of a single developed country without a non-contributory old age pension. More generally people I respect, like Noel Maurer, have said that the US’ Social Security system can be made sound with quite feasible increases in taxation. This does not apply, to the best of my knowledge to the large public sector pensions though. They were based on assumptions of economic and population growth that just don’t hold and without politically impossible levels of taxation they’re doomed.
> The repeated failures of unplanned models get lost down the memory hole.
Well no one planned those unplanned models. Extremely generous public sector pensions have been known to be actuarially unsound for decades. The planners know very well a reckoning is coming. They just hope it doesn’t happen while they’re in office.
> 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.
At least investment funds don’t saddle the taxpayer with obligations run up by long gone politicians. There are well run government pension systems, or there’s one, Singapore’s.
I am not sure why you discount real estate. You might not think it is a good investment, but it is still the idividual managing their retirement. Besides, in this context "real estate" mostly means owning your own home. The main benifit here is not the paper value of the house, but the imputed rent. If this value goes down, by definition, cost of living went down a corresponding amount. (There is admitadly the risk that you want to move, and the local market tanked).
This is not true. There is a negative correlation between economic growth and population growth, e.g. economic growth slows as population grows.
https://www.theigc.org/blog/is-population-growth-good-or-bad...
The absence of a pension is a Ponzi scheme, because the only source of funds for people no longer working is that of people currently working.
The "pensions were supposed to" should be reframed- pensions "would have fully taken care of people...." had they been properly defended rather than attacked and dismantled.
That pensions still exist, that they have been funded even to 35%, after the unrelenting assault on them by private capital, is an incredible achievement. The equivalent funding level for alternatives to pensions is something like 10%- taking real estate into consideration. Without real estate, the funding level is probably less than 1%.
It is a difficult, difficult problem to organize humans to fund the future at scale. Pensions were/are an incredible success, even if that success is partial and insufficient.
[1] https://www.weforum.org/agenda/2015/01/what-is-the-life-expe...
And attributing the failure of pensions to meet their obligations to ‘attacks’ and lack of ‘defense’ isn’t a well formed opinion or argument, yet you dole out plenty of shade on others’.
Instead we really need to invest more in productivity gains for the world's bottom 90%.
This assumes distribution can have no positive impact on output, which is certainly not an established fact.
We know this isn’t the case.
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.
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?
Sure it is. When the last round of tax cuts were configured, deliberate choices were made that affected different income brackets in different ways. The levers can be tweaked to direct the benefits to the poor, the wealthy, the middle class, etc.
> 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?
I already did, with a linked source for further details.
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/ill...
[2] https://www.forbes.com/sites/ebauer/2019/01/10/the-problem-w...
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.
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.
I favor large inflation, which bankrupts the trillionaire while the working Joe keeps earning 'new money' and does ok.
Well that's hilarious. If the tax system in the US was truly progressive then it wouldn't have so many billionaires.
source: https://www.bloomberg.com/news/articles/2018-10-14/top-3-of-...
Does it include yourself?