The “midlife crisis” of Generation X or the Millennials, could be piece of cake when compared to what seems to await for them down the years.

Tim Harford, making reference to a new research paper from Angus Deaton, Nobel laureate in economics, argues that “people who would have their wellbeing most improved by a cash injection are the middle-aged, people between their forties and their sixties.” “A monetary remedy for the midlife crisis” March 31.

It is a fun argument for Harford to use when “I will have a word with my father and my children”.

But what would Harford say if the answer he got from his children was: “Daddy, in terms of where you find yourself in your lifecycle, you are the one living most over your means… so no cash for you… spend less… save more (so that you might leave some to us as your father left to you)… and for God’s sake get rid of those risk weighted capital requirements for banks that hurt us so much.”

That mentioned piece of regulation, by favoring banks to finance the present safer consumption over the “riskier” future production, has already placed a reverse mortgage on the current economy, which is jeopardizing everyone’s future.

And also, since it amounts to a gross violation of Edmund Burke’s holy intergenerational contract, I would suggest Harford and his generation begin to prepare a very good defense speech for when they will have to respond to their children why they allowed that to happen.

And Harford, as a retiree, or at least his generation of retirees, will also suffer because, as I have argued so many times, there is no better pension plan than having children who love you and are able to work in a reasonable healthy economy.

Sir, my grandchildren will at least know how much their grandfather, obsessively, fought against that crazy risk aversion. Will yours?

PS. If you dare to see how the elderly could so unexpectedly for them be suffering horrors, have a look at what is happening in Venezuela.

The globalization of idiotic bank regulations caused globalization to go astray

Sir, Wolfgang Münchau writes: “Another shock has been the global financial crisis — a consequence of globalization — and its permanent impact on long-term economic growth.”, “The revenge of globalization’s losers” April 25.

Yes that is the result of idiotic global bank regulations that:

1. Allowed banks to leverage more with assets perceived, decreed or concocted as safe; and thereby make banks earn higher expected risk adjusted returns on equity with these “safe” assets; and thereby gave the incentives that by generating excessive exposures against too little capital, caused the crisis.

2. Require banks to hold more capital against what is perceived as risky, like SMEs and entrepreneurs, and thereby earn less risk-adjusted returns on equity that what they can earn with “the safe”. And obviously such distortion must impact long-term economic growth.

But Wolfgang Münchau seemingly insists in thinking these risk weighted capital requirements are great. Could it be because he sees himself as a soon to be retiree? I say this because the risk aversion implicit in the risk weighing is precisely what a financial advisor would recommend to someone with a much shorter life expectation than young professionals’. 

@PerKurowski ©

And what about the “pension mugging” produced by low interest rates produced by monetary policy?

Sir you write that Britain must make sure that the conversion of lifetime saving into decent retirement incomes is performed with total honesty, “Act now to prevent pension mugging” December 13.

But the number one factor which determines the amount of the annuity, at the moment of conversion, is the interest rate that insurance companies can earn long term on the “lifetime savings” received. And so now, when monetary policy is officially manipulated, so as for interest rates to be artificially low, especially the long side, the question is who is going to be responsible to the retired for the low annuities they receive?

How would you to explain to a retiree who converts into an annuity today if his neighbor, converting the same amount at a future time, receives a much higher annuity?