Comment by dpc_pw | Hacker News Reader

Comment by dpc_pw | Hacker News Reader

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There is 70M of Boomers in US. (Generally) about to end a decade or two of their most productive years: highest skills, highest level jobs, house paid off, kids out, etc. - trying to save and invest enough to give themselves a good retirement. Just yesterday I was listening to some YT podcast and boomers own ~74% of all US economical activity. Many of them accepted low salaries, for the promise of pensions and so on. Paid taxes but were promised medicare and other benefits that they expect to eventually get. They are (in great part) the savings glut: https://www.brookings.edu/blog/ben-bernanke/2015/04/01/why-a...

How else would your explain negative interest rates? That have not happened in the recorded history before and doesn't really make sense. There is a certain CB manipulation involved, sure, but generally - it's the result of many people competing to preserve and invest their savings. This trend will reverse - and then... wow... these Boomers are in for a surprise when it turns out we've spent their money on stuff like WeWork and other huge startups with no positive cash-flow, and rest was spent by the government.

The aggregate amount of savings by a generation is almost entirely irrelevant to the aggregate material conditions that generation has in retirement. They're not canning food and stashing it in their basement like a squirrel, they're generally simply acquiring financial claims on future productivity. And this is exactly what a bubble is - higher prices on financial assets, which means more assets per real dollar of future production.

>these Boomers are in for a surprise when it turns out we've spent their money on stuff like WeWork and other huge startups with no positive cash-flow, and rest was spent by the government.

Current misspending doesn't particularly impact future retirees. It impacts current retirees and workers. Current aggregate retiree spending is always equal to aggregate worker saving plus tax transfers from workers to retirees. This misspending means that material wealth that could have been consumed by either retirees or workers is instead wasted.

The only ways for Boomers to be wealthier in retirement, as a class, are for society to be wealthier or for a higher percentage of society's real production to be allocated to Boomers via taxes or sold for their savings.

> And this is exactly what a bubble is - higher prices on financial assets, which means more assets per real dollar of future production.

Exactly. Deflation (financial asset cost inflation) now, for inflation (financial asset cost deflation) later, right?

> Current misspending doesn't particularly impact future retirees.

I agree with everything, except this part. Have we used all this surplus productivity to actually increase future productivity (invented some life changing gene therapy, cheaper transportation methods, better medical treatments, and so forth) and government used that debt to increase productivity as well (better infrastructure etc.), the quality of life would improve for everyone (including retirees), making the society as a whole spend more of their productivity voluntarily giving back more to the investments boomers bought with their savings.

It didn't have to be a bubble if it delivered the value. The future inflation and capital reallocation from society to the retired could have been offseted by an increase in productivity, keeping everone's quality of life raise, or at lest not fall.

But obviously, you can't pull ground breaking discoveries and great bussinesess out of the hat, and make government more efficient, just because there is more money to be invested. Quite the opposite. Surplus was mostly wasted and reallocation will have to come at the cost of the quality of life.

>But obviously, you can't pull ground breaking discoveries and great bussinesess out of the hat, and make government more efficient, just because there is more money to be invested. Quite the opposite.

I think we agree more than you think here. There weren't any good investments to be made, so the extra money thrown at investments is wasted through malinvestment rather than consumed. The big difference is that I'm explicitly trading off malinvestment with current consumption, rather than the inaccessible hypothetical world in which productive investment opportunities were pulled out of a hat.

> How else would your explain negative interest rates?

Um, central banks that are charging negative interest on reserves.

No. :D

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