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. 

@PerKurowski

There are many reasons we the aging should pray for the young allowing us to fade away with grace

Sir, Manoj Pradhan explores the question: “What will the future hold for the world’s ageing populations” and titles his article “Ageing economies will grow old with grace” October 14. That is indeed a sunny view; let’s pray for it.

When Pradham writes: “The elderly will resist moving out of their homes; a huge wave of construction will be needed to house the young and the millennials” some difficult questions linger: Are the young and the millennials willing to cast themselves as the downstairs and allow the upstairs elderly to stay in their homes? Will the savings and pension plans of the elderly be sufficient for them to stay in their homes? With retirement comes the wish to hold savings more liquid and so who is going to finance that huge wave of construction?

As I have argued for years, bank regulators, with their capital requirements based on perceived credit risk, which has given perceived credit risk too much weight, has caused a stagnant world… and to keep social structures amiable to all in a stagnant world is not an easy task. 

In March 2007 Peter Peterson, in FT, concluded his “Sacrifice can solve the entitlement crisis”, by citing the German theologian Dietrich on the ultimate test in moral society being the world it leaves for the children, and saying that “It is time for us to become worthy and moral ancestors.”

And in August 2006, finished an article I sent to FT, but that was not published with the following:

“It is said that in Scandinavia, a long time ago, when the older people felt that they stood in the way of the young, they threw themselves off steep cliffs known as an ättestupa. These days it could seem like quite the opposite, if we consider how our democracies might have been captured by us baby boomers. We need to revise urgently how our society deals with the next generations, before they throw us down an ättestupa—for damned good reasons!”

Sir, there are many reasons we the aging should pray for the young allowing us to fade away with grace.

@PerKurowski ©

Our economies are drowning for lack of oxygen in overpopulated safe havens.

Sir, I refer to John Dizard’s “Central banks enlist ageing populations in the competitive devaluation game”, March 28.

Dizard discusses Bank of Japan’s paper “Demographic Changes and Macroeconomic Performance — Japanese Experiences”; IMF’s “Is Japan’s Population Aging Deflationary?” and a paper by BIS titled “Can Demography Affect Inflation and Monetary Policy?”

One aspect not discussed in connection to this demographic change, is that since increased risk-aversion goes with the investment objectives of an aging population, the demand for safe havens relative to risky bays should be increasing.

Add to that the sad fact that bank regulators decided, on their own, that it was more important for our banks to avoid risks instead of to allocate bank credit to efficiently to the real needs of the economy, that of course also adds immensely to the demand for safe havens.

And it is only getting worse. Now by means of added Basel III liquidity requirements for banks, and Solvency II regulations for the insurance sector, which all-predicates risk-aversion, the demand for what’s “safe” must grow even more.

And, since any safe haven can become extremely dangerous if overly populated, it should be clear that an amazing scarcity of financial safety is lurching around the corner. Poor widows and orphans financially they will be more widowed and orphaned than ever.

But also poor the coming young generations, those who will be denied that societal risk-taking that could help them to have a good future with plenty of jobs.

@PerKurowski

How long will the young stand for the nonsense of the ageing baby-boomers?

Sir, Michael Stothard, in “Elderly set to ride to rescue of fixed income” July 26, writes “a ray of sunshine – the bond market pessimists are failing to factor in: the rapidly ageing population across the western world.” Those over 65 years old are 16 percent of population today and expected to be 25 percent in 2042.

The argument is that the elderly will abandon equities and turn to safe bonds. The equities for which there will still be some demand are safer dividend-paying stocks and those related to services to the elderly, including funeral operators.

“A ray of sunshine”? If we add to this that the current ageing baby-boomer bank regulators want banks only to make safe loans and not take risk on small businesses and entrepreneurs… who is then going to finance the new generation of jobs our young so urgently needs?… who is then going to provide the growth that will keep those safe bonds safe.

In the back of my mind, by the day looms louder the question of… how long will the young stand for this type of nonsense?

Should then the ageing population emigrate?

Sir, Martin Feldstein argues in his “Immigration is no way to fund an ageing population” December 14, that immigration would generate very little additional tax revenues as immigrants “generally earn less than native Spanish workers” but which is something that with time, and increased scarcity of younger working people, is and should not necessarily be true. That said by giving the example of Spain where “the number of working-age people per retiree is expected to fall from 4.5 today to fewer than two in 2050” he also brings forward evidence that seems to prove that without immigration there would be no way to fund or manage an ageing population… unless of course the ageing population emigrates. The way out of this conundrum that Feldstein proposes is to “supplement the tax-financed benefits with increased saving and investments” but what that has to do with immigration is somewhat hard to understand, since whether they can afford it or not, the elderly will still need help, and also someone should be doing the jobs they all do now in Spain, unless you want that nation to behave like an old soldier and just fade away.

Martin Feldstein immigration ageing population