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

Should they now sue their Central Banks?

Warning, believing in your Central Bank is lethal for your pension plan!

Sir, Samuel Brittan, in “Central banks need not divine bubbles”, July 28, tells us, quite blasé, almost like shrugging some dust of his shoulders, that inflation, as measured, does not measure inflation, because although wheat, consumer goods, are cared for, cattle, capital assets, are royally ignored. 

The adjectives he uses in the process are ludicrous and absurd, but concludes in “Yet that is the perceived central bank doctrine today”. We are left a little bit confounded though with what he really means with “perceived” since reading further from what Brittan has to tell us it seems that it is indeed state of the art in how central banks try to measure inflation. 

Which leaves us now with the question, what are all those poor blokes that believed the inflation figures reported by their central bankers were for real and did such stupid things as invest in government debt, instead of a house, thinking it paid enough to cover for inflation? Should they now sue their central banks and central bankers for misrepresentation? 

Whatever, it sounds like making nursery rhymes out of Enrons and Parmalats. It is not that we believe it is easy to measure inflation and in fact it might be impossible. Nor can it be easy do to a central bank's job for that matter, but it is the arrogance by which they sell us the how good they are at it that really kills us.

 

It is a sad day when think-tanks are found out not to have been thinking for many years.