If building houses where they are actually wanted, which we should, what do we do with the unwanted lot?

Sir, Robin Harding holds “What should not be in doubt is that supply limits are the single biggest problem with housing… reform the planning rules, and let people build homes where they are actually wanted.” “Planning rules are driving the housing crisis” August 15.

I agree, of course we should build houses where they are actually wanted, but the challenge of what to then do with the unwanted lot, poses major difficulties. 

It is not solely “the role of falling interest rates in pushing up house prices” that has caused houses to become financial assets. Much other preferential treatment is given to the financing of house purchases. Among other, because the financing of houses is perceived so safe by regulators, banks need to hold much less capital against residential mortgages than, for instance, against loans to entrepreneurs. (Those entrepreneurs who could create the jobs that would allow for mortgages to be duly serviced and utilities to be paid).

All that has helped house prices to shoot up and become the most important financial asset for way too many, whether for the owners, or for the banks or other who have helped many owners to extract whatever equity he had in his house.

As a consequence our society, our economies, have become mindboggling exposed to the need of keeping up house prices, while simultaneously needing house prices to become more affordable. To navigate well those waters will not be an easy task. 

Looking at some demographic realities perhaps what needs to be done is not to build more houses, but to build more senior citizens residences, thereby freeing many upstairs so that children could move up from the basements or other young move in.

@PerKurowski

Fewer younger and with its banks working with standards appropriate for the much older, dooms Brazils economy

Sir, Martin Wolf writes: “Brazil is in economic, political and moral crisis…too many people are unemployed, the economy is too feeble, the politics too corrupt, and the state too captured…Brazil needs a political and economic rebirth. The crisis makes this necessary. If that does not happen, the future looks sad.” “Brazil’s crisis creates an opportunity” November 8.

Wolf recommends, among other “A funded pension scheme could raise national savings. The government must also have the freedom to control the numbers and pay of civil servants. Doing all this would liberate resources for other areas”

Indeed. But for those resources to be able to flow to where they can be most productive, Brazil also needs to rid itself of that odious regulatory risk-aversion imbedded in the risk-weighted capital requirements for banks. If not Brazil’s future, as well as that of any other nation that keeps those regulations, is doomed to be very bleak.

From “1970 to 74 in 2017…the fertility rate in Brazil has fallen from five children per woman to just 1.7… the population is ageing”.

I understand that for one of Mr Wolf’s age (and perhaps even mine) a risk minimizing investment strategy makes sense but were any financial advisor to suggest that to a young professional starting out, he might very well lose his accreditation. 

http://teawithft.blogspot.com/2009/10/please-free-us-from-imprudent-risk.html

@PerKurowski

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

Do current debates on climate change consider sufficiently demographic projections?

Sir, I refer to the different opinions expressed in FT on the UN Climate Change Conference in Paris.

IMF, in a Staff Discussion Note of October 2015, “The Fiscal Consequences of Shrinking Populations” writes: “Declining fertility and increasing longevity will lead to a slower-growing, older world population... This, in turn, contributes to a more sustainable pattern of development and reduced pressures on the environment.”

And the World Bank, in its advance of the “Global Monitoring Report 2015/2016: Development Goals in an Era of Demographic Change” mentions: “Demographic trends and related policies will have implications for the global environment and for the effectiveness of adaptation and mitigation strategies. Family planning and reproductive health policies may help mitigate the negative effects of climate change by reducing population growth, especially in pre- and early-dividend countries. Education is not only likely to lower fertility, it can also have a major impact on the effectiveness of measures aimed at tackling the negative effects of climate change…”

And so Sir, it looks clear that if we have an aging world with falling population our economical challenges will increase but our climate change challenges might lessen. And vive versa if we have a world with growing population it might be easier on the economy but climate change challenges might worsen.

Is the current debate on climate change considering sufficiently this relation?

What if in 40 years the world has to explain to its pensioners that there is no money for them, because it was quite unnecessarily spent on problems derived from a climate change scenario that did not include demographic projections? 

@PerKurowski ©

How should the UN’s SDGs interact with the enormous demographic challenges now discussed by IMF and World Bank?

Sir, Martin Wolf writes: “a combination of new technological opportunities and new approaches to a deal opens up fresh opportunities… to curb risks of catastrophic climate change” “The upside of addressing climate change” October 28. Let us pray that is so.

But both the World Bank and the IMF, when now in October 2015, they discuss the huge demographic challenges the world face, they also report on a sort of low-tech tool that will seemingly also be helpful addressing climate change, namely lower fertility.

IMF, in its Staff Discussion Note of October 2015, “The Fiscal Consequences of Shrinking Populations” writes: “Declining fertility and increasing longevity will lead to a slower-growing, older world population... This, in turn, contributes to a more sustainable pattern of development and reduced pressures on the environment.”

And the World Bank, in its advance of the “Global Monitoring Report 2015/2016: Development Goals in an Era of Demographic Change” mentions: “Demographic trends and related policies will have implications for the global environment and for the effectiveness of adaptation and mitigation strategies. Family planning and reproductive health policies may help mitigate the negative effects of climate change by reducing population growth, especially in pre- and early-dividend countries. Education is not only likely to lower fertility, it can also have a major impact on the effectiveness of measures aimed at tackling the negative effects of climate change…”

And the UN’s SDGs does include, as Target 3.7, to “By 2030, ensure universal access to sexual and reproductive health-care services, including for family planning, information and education, and the integration of reproductive health into national strategies and programs”

Otherwise the SDGs, except for some minor references, in target 11.2 to the need of improved public transport for older persons, and in 11.7 to providing access to green and public spaces for older persons, seems to completely ignore the demographic challenges IMF and World Bank reports on.

It will be very interesting to see how the SDGs and demography will complement each other and or compete for scarce resources.

@PerKurowski ©

Martin Wolf and the rest of us baby-boomers might soon be invited to visit an “ättestupa”

Sir, Martin Wolf looks to explain “Why the world´s youth is in a revolting state of mind” February 19. He fails to sufficiently transmit the seriousness of the issue something that you might understand better when reading reports about the millions after millions of young men in the Middle East who because of a lack of job opportunities will not ever have the means required to start a family.

Wolf would do well placing all the demographic challenges the world faces in the perspective of the fact that the only objective for our banks their regulators have set, is for the banks not to fail. Perhaps the regulators have been appointed by the baby-boomers with the instructions of making sure their assets are safe while they are still around, in the best “après nous le deluge” style.

No! Our youth deserves our banks perform their capital allocation function freely and without regulatory interference. Otherwise we older, Martin Wolf included, might with reason be invited by the youth to take a walk to the nearest “ättestupa”… meaning those cliffs from which according to a Scandinavian myth the elders threw themselves down when they no longer were useful. But perhaps it is that Mr. Wolf is counting on himself being lucky enough to find himself among those with “resource wealth to buy off their young”

Two nightmarish possibilities

Sir, Christopher Caldwell’s brilliant “Youth and war, a deadly duo”, January 6, based on the probably even more brilliant book Söhne und Weltmacht by Orell Füssli, and that now has me brushing up on my 35year´s never more spoken and originally bad German, brings me two visions. The first is about a clash-of-generations pitting the baby boomers and other older people all over the world, wielding their wealth and political power, against hoards of desperate barehanded youths, and the other, of a big global arena were a mass of old Neroes are enjoying the spectacle of young gladiators killing each other. Let us pray we are wise enough to spare ourselves either nightmare.

Caldwell Füssli Söhne Weltmach youth

An Ättestupa for Mr Lind

Sir, Mr Michael Lind in his “A labour shortage can be a blessing, not a curse”, June 9, sees himself in old age pampered on a chaplinesque modern times assembly line, and happily concludes that technology will take care of the current demographic imbalances. 

Of course, his vision, where it would seem that all the remaining young concentrates on helping the elderly, ignores that a country besides that very laudable activity, also has to think of a present and a future, and generate that kind of economic growth that will help it among other to educate their new young, defend themselves and service their debt. 

If going down the Michael Lind route then the applied technology will more probably be in line with going down an “ättestupa”, meaning those high and steep cliffs supposedly used by the Nordic elderly a long time ago to throw themselves from when their time to serve society had passed. By the way, when discussing immigration with those who vigorously oppose, it is amazing how a “well if you want to take care of repaying you public debts on your own so be it” dilutes much of the certainty in their eyes. 

Sent June 9, 2006 

Note: For this letter I based myself on myself as in my Voice and Noise you can read

The practical solutions available for solving the shortage of caretakers in developed countries are the following four:

 

1. Increase their productivity, but unless you wish to run the risk of being dehumanized on a Charlie Chaplin Modern Times assembly line cared for by robots… there might be a limit to how much this can help. 

2. Move the careneeders to another place (if there are caretakers available anywhere else), and this you should do as early as possible if at an older age you do not appreciate finding yourself in strange surroundings as much as you did when younger. 

3. Import caretakers, and this you should do as early as possible if when older you do not appreciate finding yourself in the company of strangers as much as you did when younger. 

4. Give incentives for having more children and grandchildren—which is not such a crazy idea when you start considering how much society is, one way or another, currently rewarding people for not having children. (Talk about externalities!)