October 22, 2017

How much will the fewer younger be willing to give up in order to help the larger number of older?

Sir, John Dizard argues that It is hard to have a tax cut-driven jobs boom for the ‘real Americans’ if there are fewer of them around” “Financial world’s promises impossible to meet within an ageing demographic” October 22.

Indeed, demographics will make all so much serious, but let us not assume things are going so as to be a rose garden without that factor.

The kicking the 2007-08 crisis can forward with QEs; the ultra low interest rates that makes it easier to take on debt and in some ways introduces economic laziness; getting equity out of homes like with reverse mortgages in order to spend; risk weight of 35% on financing residential houses and of 100% when lending to the riskier SMEs and entrepreneurs who have the best chances of building future and create jobs; a mindless 0% risk weight for so many sovereigns only based on that these can print money to repay… is driving the world towards a crisis not only because of the lack of young workers, but also because of excessive unpayable debts.

There will come a day when all those young living in the basements of their parents’ houses will say “Hey ma-and-pa, you go downstairs, now it is our turn to live upstairs”… and that is perhaps even the best case scenario. Things can get to be truly ugly (ättestupa)… except perhaps if we are able to put billion of robots to productive uses (like they are trying in Japan) and tax them and share out those revenues with a universal basic income.

I have always argued that the best pension plan that exists is having children and grandchildren that love you, and who are able to work in a workable economy. Thank God I got the first… but I am beginning to seriously doubt achieving the second.