The Old Are Eating the Young

https://www.bloomberg.com/view/articles/2017-06-13/the-old-are-eating-the-young

by petethomas • 9 years ago

338 448 9 years ago

ar0• 9 years ago

Note that the article makes a crucial assumption: That all those unfounded future liabilities (most of which are pensions etc. I assume) of governments are fixed and cannot be changed. This isn't true, though: By changing the law, those unfounded liabilities can be erased at the stroke of a pen.

What does this mean? That these staggeringly high numbers (if true) do not necessarily mean doom but "merely" that at some point people will find out that the pensions they have been promised won't be there when they reach retirement. (I.e. what the people in Greece are currently painfully experiencing will eventually hit others, too - one pension cut after the other until little is left.)

This doesn't necessarily affect "future" generations, though: Those that will pay for it is the generation that lives through the cut, i.e. which has paid into the system before the cut but was due to receive money only after the cut. This can very well be a generation that is alive today.

Edit: Just to clarify - the article conflates these financial liabilities with environmental damage. Just to avoid confusion: obviously, environmental degradation cannot be erased with the stroke of a pen, the above is only talking about the financial side of things.

Joe-Z• 9 years ago

Being born and working in a country with a strong social system, this is just another positive for my current lifestyle: Just earning enough to sustain myself and paying only minimal taxes so as not to waste anything on benefits I will never get back!

Now I made myself sad...

a_bonobo• 9 years ago

If everybody behaves like you then the above comment becomes a self-fulfilling prophecy...

ruirr• 9 years ago

I was also born in a country "with a strong social system". The so called social system is in shambles, and contributing to it is basically contributing to a ponzi scam.

usuallybaffled2• 9 years ago

How can it have a strong social system with minimal taxes?

Roritharr• 9 years ago

I have to agree. I see this attitude in ever increasing numbers of German developers as our High-Tax System even openly admits to all the benefits you won't receive.

The amount of taxes one has to pay compared to the security one is offered feels strongly out of whack for the 60-200k/yearly family salary bracket.

There is braindrain, but also Stockholm Syndrome. I oftentimes see discussions between developers where ones that have left Germany's system get attacked behind their back for being so "irresponsible" and missing out on security systems here, while enjoying, after about two to three years of saving money elsewhere a lifestyle of financial security that is leagues above everything the german social security can offer. There are lots of reasons to stay in Germany, but social security and finances aren't ones if you are a talented developer that is just looking for a good life.

It's a strange tension currently, I'm unsure where this will lead in the long run.

patrickg_zill2• 9 years ago

In the former USSR, people were still getting their promised 60 rubles per month pensions. It's just that inflation had eroded the value of each ruble to where the government had no problem paying such an amount.

(Later, however, the government did increase many pension payments, from total penury level to grim survival level.)

mseebach5• 9 years ago

They're on to that one. All of the "interesting" liabilities are indexed to one (or more - in the UK three) inflation measures.

gnicholas• 9 years ago

In some jurisdictions, pension guarantees have constitutional protections that may not be erasable by simply passing a bill [1]. While an amendment to the constitution (the CA state constitution, in the case cited) at issue would fix this problem, getting such an amendment passed would not be easy — at least not while many pension recipients are still alive and voting. Senior citizens generally turn out to vote more than other groups, and when their pensions are at risk you can bet they'll show up in force.

1: http://reason.com/blog/2016/11/30/california-supreme-court-w...

jk232316• 9 years ago

"In some jurisdictions, pension guarantees have constitutional protections that may not be erasable by simply passing a bill."

You would be surprised what bills can be passed. The 3rd Reich ("Nazi Germany") was supposed to last one thousand years by the way. It didn't. And in the end laws won't enable to circumvent the laws of nature (limited resources).

pmontra3• 9 years ago

Note that the article makes a crucial assumption: That all those unfounded future liabilities (most of which are pensions etc. I assume) of governments are fixed and cannot be changed. This isn't true, though: By changing the law, those unfounded liabilities can be erased at the stroke of a pen.

Easier: default on the debt made by previous generations. No law required.

If only one country defaults it's going to be hard for them, because the future lack of trust and the inevitable retaliations. If a large enough number of countries default, it's different.

The problem is that if they default and start borrowing money again then it will be in vain. Some debt is inevitable (think mortgage to buy a house) but debt for everything is too much despite being convenient: get the money now instead of with next year's taxes and possibly get as much money as the larger country next door (a competitive advantage but be wary of interest rates.)

nostromo• 9 years ago

Easier: default on the debt made by previous generations.

Previous generations didn't leave us with much debt. Half of the debt is from post-2007. 85% or so came after 1990.

Previous generations were actually good stewards compared to today.

lmm4• 9 years ago

Mortgages to buy houses are not at all inevitable. Arguably they're the root of most of our debt issues.

pjc508• 9 years ago

"default on the debt" == "invalidate government bonds" == "blow up everything dependent on treating those as relatively safe assets" == "massive losses or bankruptcy of private pensions and insurance companies"

The Argentinian bond default from the early 2000s is still being litigated.

TuringNYC2• 9 years ago

"at some point people will find out that the pensions they have been promised won't be there when they reach retirement."

One might argue this has already happened in the US, just subtly. Inflation (mostly ZIRP driven) has been very high, and is a hidden tax on those with fixed incomes. Perhaps headline inflation indicators are not high, but just look at the largest component of spending (rent) and you realize how difficult it must be to live on fixed pension payments. As a double whammy, seniors who tediously saved money hoping to earn interest income in their later years, find that income yield is near zero. This doesn't even consider the other major component of spending (healthcare)...

notacoward6• 9 years ago

Inflation (mostly ZIRP driven) has been very high

Totally untrue. In 2013-2016 inflation was lower than at any time in the last half century. 2017 has been a bit higher, but still lower than all of 1967-1996. Sure, you can cherry-pick a particular commodity in a particular market to make it seem otherwise, but momentary or local fluctuations in supply and demand aren't really inflation. Inflation is a systemic phenomenon, and it's actually at historic lows. The fact that some people make life choices that subject them to rising costs doesn't really have anything to do with inflation.

http://www.usinflationcalculator.com/inflation/historical-in...

jk232316• 9 years ago

"What does this mean? That these staggeringly high numbers (if true) do not necessarily mean doom but "merely" that at some point people will find out that the pensions they have been promised won't be there when they reach retirement."

This is true. And since money, debt and energy are interlinked, it is very possible that there will be a cliff that we are approaching. Only two questions remain:

1. When?

2. How deep will we fall?

"There is No Steady State Economy (except at a very basic level)" http://ourfiniteworld.com/2011/02/21/there-is-no-steady-stat...

Limits to Growth–At our doorstep, but not recognized http://www.resilience.org/stories/2014-02-12/limits-to-growt...

Wealth And Energy Consumption Are Inseparable http://www.declineoftheempire.com/2012/01/wealth-and-energy-...

Galactic-Scale Energy http://physics.ucsd.edu/do-the-math/2011/07/galactic-scale-e...

_pmf_2• 9 years ago

That these staggeringly high numbers (if true) do not necessarily mean doom but "merely" that at some point people will find out that the pensions they have been promised won't be there when they reach retirement. (I.e. what the people in Greece are currently painfully experiencing will eventually hit others, too - one pension cut after the other until little is left.)

Not only Greece; it's the same in Germany. People who have worked their whole life sometimes have a lower pension than they would receive if they would apply for welfare.

TeMPOraL3• 9 years ago

By changing the law, those unfounded liabilities can be erased at the stroke of a pen.

True. However, the problem is: doing that will land a government in a world of trouble.

Firstly, the popular unrest. While in my country, it seems that most people under 30 don't believe the government pension scheme will survive to our retirement, people older than that do hope for their promised pension. After all, that's what they worked so hard and paid so many taxes for. Pull the rug out from under them, and my bet is you'll have riots in the streets[0].

Secondly, loss of trust. Kill off something as big as a pension scheme, and good luck in convincing next few generations to believe you if you want to reinstate it again.

[0] - Related - many young people will join too. While I fully intend to support my mother in her old age, if the government decides to take away her retirement money, I'd be pissed personally too - after all, they'll be impacting my finances as well.

Also related: that's why the loss of low-skill jobs by automation can't be ignored by people with high-skill jobs. Because after all, when your father, uncle, sister and closest friends will find themselves unemployed, who will they ask for help?

Brakenshire6• 9 years ago

This is one of the major reasons why the UK Conservatives just lost the election, they attempted to

1) Maintain the ratio of working life to retired life by increasing retirement age in proportion to increased life expectancy. Which meant increasing retirement age to 67 by something like 2050.

2) Reduce the triple lock of pensions - which means the state pension rises by a minimum of either 2.5%, the rate of inflation or average earnings growth, whichever is largest - to a double lock, which only includes the latter two elements.

3) Means test the payment of winter fuel allowance, which is a yearly payment of about £300 made to everyone above a certain age, so that it would not be received by wealthy pensioners.

4) Put in place what was effectively an inheritance tax for payment of social care (i.e. care homes and in-home care) after death, which is currently both criminally underfunded and also massively expensive.

In combination, this is something like £15bn each year of extra spending now, rising to £50-70bn each year within the next 30 years.

All of these measures were opposed by Labour, and their most enthusiastic supporters are the young.

ddebernardy• 9 years ago

While in my country, it seems that most people under 30 don't believe the government pension scheme will survive to our retirement, people older than that do hope for their promised pension.

FYI and based on my anecdotical observations, mid- to late Gen-Xers rarely if ever think they'll get anything either. As to your finances when you'll need to support your parents or those of your spouse, IMO just try to get over it. You know it's coming anyway, and so do they.

What might be more concerning in practice as a society is what to do with boomers and early Gen-Xers who didn't make enough (or any) kids. Where before retirement plans it may have been for 4+ kids to take care of their parents, it's trickier when there's a single kid or none.

Aside: the Swedes, if memory serves, have an interesting take on retirement. Namely, there's a fixed-sized pot. What you get isn't based on how much you put in but rather on how much you put in compared to others. I'm pretty sure all countries in Europe with eventually adopt a similar system.

qb452• 9 years ago

Disclaimer: I know about economy as much as the next guy.

Retirement pensions are one thing, the other is debt - whenever I hear that all countries are in debt I think of the law of conservation of mass and have an obvious question: who is this monumental, multiple-GDP debt owed to?

I figure it must be the private sector, but in such case - why are they lending? It looks like either there are people with resources they have no idea how to invest in something actually productive or there are people who knowingly choose to invest in this somewhat risky business of "pay companies to do something for the public now and hope that the public will return you more than the GDP of the whole country, maybe it will work out", which is how I see these big national debts.

Who are these investors and how hard would it be to make them cut their losses?

At the risk of committing a blasphemy against capitalism, could it be a sign of insufficient taxation of the proverbial "top 1%"? This doesn't necessarily need to be "top 1% individuals", maybe it's "top 1% companies" or "top 1% banks" or whatever. In either case, it appears that somewhere, someone has some big money which is being spent on public projects anyway but under the guise of an "investment" which may actually be a big dud.

daemin5• 9 years ago

The government doesn't want to do this because they will lose the next election if they do, guaranteed. They will never get enough votes from younger people to offset the guaranteed loss from the older people.

gerbilly• 9 years ago

About the debt, why not just all default at once and start over at zero.

Then we could concentrate on starting to repair the damage we've done to the environment.

It's not like it's a law of the universe that these man made tokens have to be paid back with sweat and tears.

cjcole2• 9 years ago

Firstly, the popular unrest.
Pull the rug out from under them, and my bet is you'll have riots in the streets[0].

Let's make this even more fraught.

Imagine that the cohort net paying into the system at any given time has a markedly different national origin / ethnic / cultural makeup than the cohort net receiving benefits.

Further imagine that those two cohorts may have some rocky history and feelings of mutual resentment or recrimination.

This has high potential to get extremely ugly unless managed extraordinarily well.

There is little doubt in my mind that this notion (well-founded or not, consciously or unconsciously entertained) is a key contributor to the current political let's say volatility throughout the Western developed world.

coldtea2• 9 years ago

What does this mean? That these staggeringly high numbers (if true) do not necessarily mean doom but "merely" that at some point people will find out that the pensions they have been promised won't be there when they reach retirement.

That's enough doom. What other "doom" would there be?

mseebach5• 9 years ago

What other "doom" would there be?

That what little you might have saved/your house is worthless because of inflation and/or punitive taxes. That the economy crashes so you can't take a job/stay on the labour market longer to make up, and your kids, if you have any, won't be able to help you because they have no jobs. That the heath service won't be there, so you risk adding sickness to poverty. Crime and civil unrest.

crdoconnor9• 9 years ago

"Note that the article makes a crucial assumption: That all those unfounded future liabilities (most of which are pensions etc. I assume) of governments are fixed and cannot be changed. This isn't true, though: By changing the law, those unfounded liabilities can be erased at the stroke of a pen."

Ultimately this becomes fight between funding the liabilities (taxing the rich once again) and eliminating the liabilities (screwing the poor pensioners).

No politicians intent on slashing pensions would ever admit that it's a choice, though, just as they wouldn't admit that it was a choice to make the liabilities unfunded in the first place.

That's why consent for these policies must be manufactured, which in turn is why this article exists - to foment intergenerational strife.

Shivetya• 9 years ago

Two future obligations are important, the social security and medicare provisions but one is worse

Many public employee pensions are in trouble is the idea of pension spiking and double dipping. pension spiking comes about by saving up sick and vacation time and cashing it out at retirement or taking on extra shifts. double dipping occurs where they retire from one qualified job and get into another though this has mostly been seen on the political side. You can end up for 100k retirees which is absurd on any level.

the trouble facing reform is there no set outcome in courts. some courts have allowed government to reign in costs and others have forced it back on the taxpayers to make up. California law has been towards and reduction is one category has to be made up in another. Illinois just keeps digging the hole as their State Supreme court has basically stomped on all attempts to fix.

The unions representing many government employees are very strong and politically active and if they cannot stop changes in court political intimidation will be the rule. the will simply work to unseat anyone who doesn't play ball. even the threat of reform by changes in party who runs the state brings out tens of millions of dollars and all sorts of shenanigans (look at Minnesota)

usmeteora2• 9 years ago

yeh, I work in clean energy, and I'm all about it, which is why casual conflations or assumed relationships like this are irking, because all it does it add to the pile of things parties that still want to reject climate change get to point to show how many arguments are lacking in substance, this being one of them.

I guess its true just about as much as any other correlation can be made with anyone who purchases anything. The more valid and underlying issue I thought would be focused on here is the baby boomers who have paid off their houses, have nice pensions waiting for them and refuse to retire after living 30+ years at the same job, while our generation has to re-educate ourselves 3-4 times over throughout our lifetimes (the first time in college being 500% more calibrated for inflation than baby boomers paid to go to college, many of who didnt need to go to get a good job) and change jobs every 7 on average years to stay relevant and avoid being too niche to niche ourselves out of career growth, which is the opposite approach of most baby boomers, relocate to follow our industries and/or navigate around jobs where we find out there is not career progress for the next 15 years because our superiors won't retire, or require a large amount of effort to navigate around their informaiton hoarding habits to maintain job security.

This along with the fact that as our generation is laden with college debt and switching jobs to stay relevant, the few who can manage to pay off loans, afford to livei nc ities where the good jobs are and set aside money for buying a home, are competing with baby boomers for starter homes as baby boomers downsize after kids graduate from college, so now many jobs, even most engineering jobs outside of software have us held back from higher positions and catalyzing change due to baby boomers, and their cash offers make it impossible for promising young couples or individuals to mortage houses.

The icing on top of the cake is the passive comments I hear from baby boomers about how we are narcissistic and lazy.

I know these are human beings, and they aren ot to just be thrown out as soon as it bcomes inconvenient for society, but moreso than ever I experience a bigoted increase of hatred for our generation couples with a lack of acknowledgement for our hard work, increase in adaptability and refusal and resistance to wanting to grow in any way to even slightly accomodate our generation, and justifying it all under the broad stroke that we are all wasting our lives away taking selfies, and our retirement funds away on avocado toast and urbanoutfitters clothing, most of which is untrue and irrelevant to the group in our generation that works harder and longer hours and puts more time and money in our education to earn stagnant wages, and for those less educated our age who don't have jobs, they have top struggle with being their own brand and selling themselves or personalities in the service industry because there are no factory jobs to send young men of low education into, and I'm sure the baby boomer generation would be experiencing the same issues if factory jobs were not there en masse waiting for them as well.

usmeteora2• 9 years ago

I guess its true just about as much as any other correlation can be made with anyone who purchases anything. The more valid and underlying issue I thought would be focused on here is the baby boomers who have paid off their houses, have nice pensions waiting for them and refuse to retire after living 30+ years at the same job, while our generation has to re-educate ourselves 3-4 times over throughout our lifetimes (the first time in college being 500% more calibrated for inflation than baby boomers paid to go to college, many of who didnt need to go to get a good job) and change jobs every 7 years to stay relevant, relocate to follow our industries and/or navigate around jobs where we find out there is not career progress for the next 15 years because our superiors won't retire, or require a large amount of effort to navigate around their information hoarding habits to maintain job security.

This along with the fact that as our generation is laden with college debt and switching jobs to stay relevant, the few who can manage to pay off loans, afford to live in nice cities where the good jobs are and set aside money for buying a home, are competing with baby boomers for starter homes as baby boomers downsize after kids graduate from college, so now many jobs, even most engineering jobs outside of software have us held back from higher positions and catalyzing change due to baby boomers, and their cash offers make it impossible for promising young couples or individuals to mortage houses.

The icing on top of the cake is the passive comments I hear from baby boomers about how we are narcissistic and lazy.

collyw4• 9 years ago

Its avocado on toast that causing all their problems. That and iPhones.

OliverJones3• 9 years ago

Pension liabilities are, no doubt, big. But other unfunded large scale liabilities include loans, infrastructure maintenance costs, student loans, household debt, health care costs, etc.

Basically all the stuff that turns into daily cash outlays in the Sim City game.

mcv4• 9 years ago

Those that will pay for it is the generation that lives through the cut, i.e. which has paid into the system before the cut but was due to receive money only after the cut. This can very well be a generation that is alive today.

I suspect I'll retire after the cut, but I'm glad I got out of the pension funds before the cut. I have a kind of private pension fund for freelancers, which, if I understand correctly, is technically already my money, so it can't be looted to fund the retirement of someone who retires before I do.

I am sad to see the solidarity of pension funds break down like this, and I feel a bit guilty that I'm leading the charge, but that solidarity has to go both ways. Expecting future generations to pay the entire bill for the greed and mismanagement of today, is not solidarity; that's exploitation.

brazzy2• 9 years ago

I have a kind of private pension fund for freelancers, which, if I understand correctly, is technically already my money, so it can't be looted to fund the retirement of someone who retires before I do.

Wrong.

The only difference is that your pension fund will not be "looted", it will have to cut its payouts because its investments don't yield the same returns as they did before. Inflation will do the rest.

Private pension funds and investments are no more sustainable or "honest" than public pensions.

The underlying problem is the same: the currently working population has to produce the goods and services for themselves as well as for pensioners. If they cannot produce enough of something, some people won't get that thing, and it doesn't matter what some numbers in accounts say.

InTempWeTrust• 9 years ago

Lets just vote on that. Nobody has the intention to build a anti-statistical wall. The youth would never escape the loving hug of the last generation.

Qantourisc• 9 years ago

I don't know who to blame here: the people for allowing this mismanaged of future problem, or the politicians doing the mismanagement.

As I just said this morning: "The reason you have to work longer before you get to retire is because the state failed to save and put aside the money required. And they have known for years this was coming." Lets hope we do better on global warming or other catastrophes.

papabrown2• 9 years ago

Who is to blame?

Part of the original article is a lie (at least as how it pertains to the US). The social security system will eventually be unable to pay out at current rates. But notice how nobody worries about whether we'll still be able to spend 10x what everyone else spends on the military?

A lot of this is about how we plan on spending our money. The current argument is framed as "if we don't change anything, this might happen" but the change everyone focuses on is the change in how much money goes towards satisfying the retirement savings.

You notice nobody suggests buying less aircraft carriers or scaling back the military? Instead it's all about not reducing any other spending. Putting the spotlight on one particular form of spending and then declaring that if it can't pay for itself due to demographic changes, we should scare the shit out of everyone and privatize it and pour trillions of dollars into Wall Street.

freeflight10• 9 years ago

Instead it's all about not reducing any other spending.

I'm even more amazed how many people think the welfare budget is supposed to stay fixed, not accounting for any growth in population at all, while military spending, going over budget, is considered the most normal thing in the world and leads to an increase in military budget.

mathattack2• 9 years ago

Here's the thing... It is very hard to tell now if we've gotten our money's worth for the debt. Many things are much better today than 50 or 100 years ago. Longer lifespans, better health care, less pollution.... Was it worth the debt? Hard to say.

Also - debt is just one person owing money to another. Yes someone today funded their consumption at someone else's expense. But guess what - someone tomorrow will get the dollar back to consume it. We can argue that as a country we will be paying for the consumption of others in the future, but is that so awful for the world's richest place?

(And please note - this rant comes from someone who believes we should live within our means and balance the budget)

seanmcdirmid2• 9 years ago

We can't really "balance" the budget though, as there are just too many savings needs and the USA has become a debtor of last resort (which in turn is why the dollar is so strong and widely used). Money you need tomorrow can't really be saved under a mattress, someone has to "spend" it today, hopefully on something productive that will provide enough value tomorrow to pay it back. Saved money must produce growth, it has to be invested in someway, even if it is just invested in ultra safe but low interest government bonds and treasuries.

If everyone lived within their means, but still needed to save money, we'd all be screwed. These are wild imbalances one sees in china, where the lack of a safety net and sky high housing prices means one must save much of their income, dragging down consumption and leading to easy money for SOEs, who then often spend it unproductively.

pitaj• 9 years ago

By balancing the budget we wouldn't be getting rid of debt, we'd be stopping the growth of debt. Ideally, debt should grow at the rate of inflation, but there can be some large spending times and some low spending times. Debt shouldn't be larger than a significant portion of the economy.

mathattack2• 9 years ago

You are assuming that savings needs to be govt backed debt. Why not baskets of corp debt or lower risk equities instead?

havetocharge2• 9 years ago

When I was young, I used to love articles like this. Now that I'm old, I think they are stupid.

edejong3• 9 years ago

Empty statement. Back up why you thought they were loveable and what makes them stupid now.

mythrwy4• 9 years ago

That statement doesn't need backing up.

It is self contained, and speaks directly to the nature of human opinion.

danbolt2• 9 years ago

What makes you feel you changed? Was there something about growing older that affected your point of view?

havetocharge2• 9 years ago

When I was young, I thought the world owed me. As I grew older, I learned about it. I gained perspective, and I now see that the articles like the one above are not constructive, fail to see the big picture and offer absolutely no solutions.

The young of today are likely to live longer and more prosperous lives than previous generations, worldwide. They have higher quality of life and more opportunities than previous generations.

The expanding credit market? It's due to the expanding world economy. We're on an exponential growth curve, and the young of today would be wise to take advantage of the incredible opportunity rather than lament circumstance.

shubb2• 9 years ago

A large part of this article discusses future liabilities, but makes no mention of growth.

For instance, it says total UK liabilities are 1000 times gdp, but past gdp growth over the same duration those liabilities are amortised over is 3000%.

Past performance would suggest this seeming over committed will simply be eclipsed.

There is no guarantee gdp will keep going up, either globally or in particular countries, but it does indicate that, growth is the way out and we should places our bets there.

As recent small state low tax economic policy has failed to deliver growth like we saw under bigger state higher tax policy, maybe we'd be richer if we reverted to that.

bambax• 9 years ago

Growth is exactly like Jesus. Some people strongly believe it will return, despite strong evidence to the contrary.

And we're all cargo-culting around it, changing laws, reducing taxes, opening borders to lure it in, like if growth was a wild animal afraid of fences.

Meanwhile, old people live the good life of having revenue without doing anything productive. Good for them, but I'd resent them less if they didn't vote for Trump, May, Le Pen.

shubb2• 9 years ago

Now that's a little pessimistic.

Look at the graph: http://www.ukpublicspending.co.uk/spending_chart_1950_2010UK...

Exactly what would make the next decade special compared to the last 5? If lack of growth is unusual then expecting it to return would seem rational.

Have faith brother!

peterburkimsher• 9 years ago

Some parents are generously allowing their children to live at home rent-free. Mine are not. They provided me with an education, but in fact that was a scholarship from the institution my dad works at, not their own generosity.

Young people are better-educated, well-travelled, and more aware of the world than ever before. But old people control the Human Resources department. To protect themselves, they keep changing the rules to keep us out. HR demands years of continuous work experience, not only a degree.

The result is that we settle for low-paying entry level jobs. We can't afford to have children. Instead of seeing this as a problem, I consider it a weapon in this war of generations. I'm denying my parents the joy of grandchildren.

Pension funds take money from young people and pay it out to old people. I have no hope that the fund will still be around by the time I'm able to retire (and the retirement age is probably going to increase anyway). A similar thing can be said about insurance. Therefore I think that young people should boycott pension funds. The system is not working for us, so we should not pay into it. We must continue to pay taxes because of legal requirements, but all other financial services are biased towards an older generation.

The worst part is the inequality that will come when the older generation finally pass on their inheritances. Some people will be very rich. My parents promised me that I will not receive any inheritance. So I will be poor.

The instability and debt is likely to lead to a war. It wouldn't surprise me if the USA decides to fight China about the huge debt they owe the Chinese. And who will die in the war? Young people.

We really need to see this through. (Anthem Part 2 - Blink 182)

sien• 9 years ago

The US has a huge trick they can pull with debt.

The US borrows in its own currency. Ultimately, if the US government debt burden becomes to large it can choose to print money to print itself out of debt.

There are huge costs involved in pulling these sorts of tricks, but it's far cheaper than a nuclear confrontation with China.

The Chinese are also well aware of this and don't just buy US treasuries for their own reserves.

stephen_g2• 9 years ago

Most advanced economies are in a similar position - having their bonds denominated in their own currency and having a central bank that can never run out of that currency. The Eurozone are an exception, which is probably going to cause the currency to eventually collapse, but that's another story.

There aren't really 'huge costs' to paying down debt with new money. People assume that it would cause problems, but when you look into the mechanics of how both central banks and commercial banks work, some things become clearer.

The first thing to note is that the money supply is actually constantly expanding, even without the central bank creating money, because new money is also created when central banks issue loans (see [1] for an explanation from the Bank of England, central bank of the UK). So money creation by itself is not inherently inflationary. Inflation actually happens when aggregate demand over some period is greater than the amount of goods and services produced in that period. Money creation generally does add to aggregate demand, but so does all spending in general (i.e. increasing the velocity of money). So, if money creation is properly managed (to keep it from adding too much to aggregate demand), then it can be done without any inflationary consequences.

But that only applies for a Government creating money to spend. Changing bonds ("debt") into central bank reserves is actually asset-neutral. The bond is an asset worth a certain amount that can already be bought and sold. Replacing it with central bank reserves makes it more liquid, but doesn't actually add new assets into the system.

Of course, there's not much point to paying down bonds like that. Since the Government can't run out of its own currency, their bonds are basically meaningless. Since the gold standard was dropped, they exist mainly because the private sector likes having a zero-risk asset to invest in. What really needs to happen is to stop pretending that bonds and taxes actually finance Government spending, which hasn't been the case since 1971...

1. http://www.bankofengland.co.uk/publications/Documents/quarte...

dragonwriter4• 9 years ago

The US borrows in its own currency. Ultimately, if the US government debt burden becomes to large it can choose to print money to print itself out of debt.

A major reason independent central banks exist and have monetary policy entrusted to them is to assure lenders that this—a common problem when fiscal and monetary policy are controlled in the same place, which is a short-term fix foenthe government thst crushes it's long-term credibility—won't happen.

There are huge costs involved in pulling these sorts of tricks, but it's far cheaper than a nuclear confrontation with China.

Debatable. It's probably cheaper for the US in the short rub than a total nuclear exchange with China, but “nuclear confrontation” is a broader concept encompassing many less-costly potential outcomes.

And it has pretty enormous consequences that include, even in the intermediate term, a great escalation of security risks.

Not that war with China over debt, directly, is the alternative (war with China over resources as both countries try to secure growth is more likely, though.)

joyofdata2• 9 years ago

Young people are better-educated

that's a pretty bubble-thing to say ... leave your bubble for a while and you'll see that only some young people are better educated - most are terribly educated or not at all.

bb611• 9 years ago

In the US that's just statistically accurate: https://www.census.gov/content/dam/Census/library/publicatio...

See pg 2

b34r3• 9 years ago

It's really not. The vast majority of people under the age of 30 have fully completed high school and have at least some college education under their belt.

sotojuan2• 9 years ago

I consider it a weapon in this war of generations. I'm denying my parents the joy of grandchildren.

Wow. Do you really think this matters at all?

freeflight10• 9 years ago

To some parents, this matters a lot and it matters even more to the individual making this choice because they free themselves of a huge burden put on them by expectations of society/family.

I always considered it weird how "getting children" is the default choice for so many people, even when they are clearly in no good position for anything like that, a certain scene from the movie Idiocracy always comes to my mind when I think about that.

csomar3• 9 years ago

Some parents are generously allowing their children to live at home rent-free. Mine are not.

As someone who has struggled with my parents for years to let me go and live on my own place (on my own expense), I can't understand why parents won't let their children live with them.

Is it because of space? Is it because of the extra cost? (I'd suppose it is negligible and you could contribute to it)

humanrebar5• 9 years ago

The thought is that subsidizing lifestyle choices is unhealthy compared to letting people get accustomed to the lifestyle their income affords.

zuck9• 9 years ago

As someone who has struggled with my parents for years to let me go

Why is that? Helicopter parents?

TheWiseOwl• 9 years ago

Some parents are generously allowing their children to live at home rent-free. Mine are not. They provided me with an education, but in fact that was a scholarship from the institution my dad works at, not their own generosity.

You seem to feel that you are owed more. Are you joking or are you really this bold-faced entitled?

Young people are better-educated, well-travelled, and more aware of the world than ever before. But old people control the Human Resources department. To protect themselves, they keep changing the rules to keep us out. HR demands years of continuous work experience, not only a degree.

Since when does being well traveled or aware of the world mean you are better qualified for most jobs? It very rarely matters (would you put this on a job resume?). Young adults do have degrees at a higher rate than ever before, but most of those degrees are worthless degrees.

But old people control the Human Resources department. To protect themselves, they keep changing the rules to keep us out. HR demands years of continuous work experience, not only a degree.

This is quite the conspiracy theory. So there are jobs to be had but the old people are keeping you out of them?

I define a worthless degree as a degree where you could have learned the same skill on the job or at a trade school. This is the way your parent's generation did it. The degrees in this case are a waste of time and money. They provide false hope as well.

Pension funds take money from young people and pay it out to old people. I have no hope that the fund will still be around by the time I'm able to retire (and the retirement age is probably going to increase anyway). A similar thing can be said about insurance. Therefore I think that young people should boycott pension funds. The system is not working for us, so we should not pay into it. We must continue to pay taxes because of legal requirements, but all other financial services are biased towards an older generation. The worst part is the inequality that will come when the older generation finally pass on their inheritances. Some people will be very rich. My parents promised me that I will not receive any inheritance. So I will be poor. The instability and debt is likely to lead to a war. It wouldn't surprise me if the USA decides to fight China about the huge debt they owe the Chinese. And who will die in the war? Young people.

Is this whole thing one big joke? You got me, you are trolling with sarcasm right?

Millennials are scary...

legulere• 9 years ago

You seem to feel that you are owed more. Are you joking or are you really this bold-faced entitled?

Everyone stands on the shoulder of giants. The current old generation just does not want anyone stand on their shoulders. Society was always asset driven. Assets like land and houses have become speculation objects instead of the means to living.

upvotinglurker• 9 years ago

I define a worthless degree as a degree where you could have learned the same skill on the job or at a trade school. This is the way your parent's generation did it. The degrees in this case are a waste of time and money. They provide false hope as well.

The parents' generation's employers were willing to train on the job or hire people who had learned in trade schools. (US, white collar, non-programming) employers today tend to make some kind of college degree a minimum requirement, even if what was "learned" at college bears no relationship to the job. This isn't the fault of the degree-earning youngsters.

enraged_camel3• 9 years ago

>I define a worthless degree as a degree where you could have learned the same skill on the job or at a trade school. This is the way your parent's generation did it. The degrees in this case are a waste of time and money. They provide false hope as well.

The primary reason 18-year-olds go to college is because they are told by their parents that it is necessary to get a good job afterwards. Indeed, the vast majority of white collar jobs in the USA require a bachelor's degree. Those with degrees implicitly or explicitly have a leg up on those who don't. Just ask your company's HR department.

Retra2• 9 years ago

Maybe it is entitlement. You get out of school, struggle for 15 years, and have absolutely nothing to show for it but a heap of debt. Then you look around the world and see that success isn't a reward for hard work, it's a reward for being born wealthy and connected. If you don't own land, you're screwed. It's expensive, and old people love hoarding it.

Millennials are scary? Do you know who the President of the United States is?

kitsunesoba2• 9 years ago

You seem to feel that you are owed more. Are you joking or are you really this bold-faced entitled?

It's not really feeling that we're owed anything. It's more of a wish that older generations would take a look at the world as it is today, realize that what worked in decades past is no longer viable, and adjust their expectations accordingly.

Regardless of education, you can't just walk into a job today. Worse, employers expect you to be ready to hit the ground running fresh out of the gates – few provide workplace training, even for entry level positions. If one isn't fortunate enough to land an internship, this creates a nasty catch-22 situation where you can't get into X industry due to lack of experience, but you can't get industry experience because nobody will employ you. Even if you do have a degree and experience, it's likely that you're not any company's first choice.

As a result, you end up with a ton of young people who if were entering the workforce 40-60 years ago would be on a path to a solid career instead grinding away years of their lives (sometimes upwards of a decade) working at places like Starbucks and Walmart in hopes of a glimmer of opportunity presenting itself. Some lose hope entirely and resign themselves to that kind of life.

I was lucky. My parents wanted to help but couldn't and I don't have a college degree. Thankfully I had cultivated some level of programming ability in my teens which with a couple years of living on nothing I was able to develop into a well-paid software development career, but this was only possible due to my being in the right part of the country, the current crazy demand for SEs, and because this field doesn't obsess over degrees too much.

Software dev is an odd bird in that respect. You can't do that in most other fields, and thus the idea of young people pulling themselves up by their bootstraps is largely unrealistic. Most are going to need at least a little bit of assistance to become a productive member of society, but the older generation is denying them of that.

Markoff2• 9 years ago

who will receive their inheritance? please don't say some charity or gov instead of own child which could use it

b34r3• 9 years ago

And you'll have to wait practically half your life to get it as medicine improves. So it's kind of useless when it matters.

blfr• 9 years ago

Young people are better-educated

Is there any good data showing that young people actually have more useful skills or knowledge than their predecessors did, not just certifications and years of schooling?

jrs95• 9 years ago

Are you trying to suggest that my art history degree is somehow worth less than an engineering degree?

fascist

vacri4• 9 years ago

The result is that we settle for low-paying entry level jobs.

uh... isn't the point of entry-level jobs to be the kind of jobs where people entering the market start out?

Young people are better-educated

Actually, while education years have increased, education standards have slipped. The people reaching tertiary education these days are a year or two behind where they were in the Xers days.

The point is this: stop painting yourselves as undeserving victims. Every generation faces challenges. The fact that your generations challenges don't come pre-solved for you isn't going to be solved by constantly bitching about the boomers and doing nothing.

zanny4• 9 years ago

isn't the point of entry-level jobs to be the kind of jobs where people entering the market start out?

The point of entry level jobs is to do low skilled labor. There is no grand design, especially a philanthropic one, in how corporations structure their ranks.

Job mobility is drastically down. You are much better suited to quitting your current employer for greener pastures every ~3 years than trying to move up an established ladder. There is no upward mobility from Starbucks Barista, and it isn't a pivotable skillset.

The fact that your generations challenges don't come pre-solved

I think the hostility is more about how the problems millennials face now are man made problems previous generations didn't have to face because of greater social cohesion they have no practical control over until after they inherit it ~20 years from now.

By then I fully suspect the current upstarts with ambition to be bitter and hostile and look back on "when <nation> was great" just like the boomers do now.

enraged_camel3• 9 years ago

I think by "entry-level jobs" the OP meant "dead-end jobs". A coffee shop barista doesn't exactly have a career progression.

int_19h9• 9 years ago

In the context of this article, it's about boomers expecting millennials to solve their own problems and their parents' problems (all that accumulated debt to pay pensions etc).

return02• 9 years ago

I think, beyond your personal story, an issue is that the youth today does not have the economic independence to give their parents the finger when they want to, something that in the past has created socially progressive movements. 3 decades after the internet, the dominant culture is still controlled by hollywood and TV stars.

nickthemagicman3• 9 years ago

We don't actually owe China that much. It's only like 5% of our total debt....That's a meme that's been so overblown.

notacoward6• 9 years ago

The worst part is the inequality that will come when the older generation finally pass on their inheritances.

This worries me as well. Many people who are already doing well because of their financial-care-free childhood and early adulthood will be launched even further into the economic stratosphere. Many others will be buried by the burden of supporting their parents for longer (and at higher cost) than they were supported themselves. Whatever inequality already exists is only going to be magnified by these inter-generational effects. The results won't be pretty.

zip1234• 9 years ago

"The result is that we settle for low-paying entry level jobs. "

Should you be given a high paying mid-level job when all you have is a college degree and no experience? Shouldn't people start from the bottom and work their way up? I got an entry level job after college and am not entry level now. It took a few years. Don't be afraid to take an entry level job just to get your foot in the door.

b34r3• 9 years ago

The question I guess is what is our entry level job salary compared to yours, inflation adjusted and tied to the CPI?

I'm willing to bet ours is far less favorable.

QuantumGravy• 9 years ago

In my purely anecdotal observations, there hasn't been a great demand for entry-level work, especially so following the last recession. A college degree and no experience won't even earn you the benefit of a rejection letter. People instead find themselves "sustained" on low-paying jobs that don't count as entry level for anything but fast-food and retail management. If you're lucky to come from a family with some money, maybe you get an unpaid internship or two before landing that first entry level position.

fivestar• 9 years ago

You don't absolutely have to get an 'entry level' job--you could be an entrepreneur, for example. Everything is risky. The problem I see with the entry level roles right now is that they all require ~5 years of experience! How are recent grads getting experience when the definition of 'entry level' has changed from meaning 'no experience' to meaning 'this is how much experience you need to work here?'

toasterlovin2• 9 years ago

We can't afford to have children. Instead of seeing this as a problem, I consider it a weapon in this war of generations. I'm denying my parents the joy of grandchildren.

A few things:

1. You're also denying yourself the joy of grandchildren. And children, who can be really wonderful in their own right...

2. Instead of thinking of your decision to not have children as something that affects your parents, maybe think of it as something that affects your children. The only way they get to enjoy life is if you make them exist...

3. In light of #2, maybe consider lowering your bar for what you think is "necessary" in order to have children. If you decide not to have kids, the alternative for those kids you would have had is not that they get to have some posh upbringing with all the fixins. No, the alternative is that they never get a chance at life.

Just some food for thought...

int_19h9• 9 years ago

There's no "they" there - a person that doesn't yet exist does not feel or suffer, and therefore they cannot be meaningfully empathized with, nor can there be any moral obligations towards them.

zbyte642• 9 years ago

1. You can have children further down the line...

2. Exactly, think of the kids. Conditions are not favorable for having children at the moment. Odds are it will be better for the child if I wait a few years. Whose fault is that? Not mine.

3. "necessary" at what level? To have children you don't need healthcare, decent education, and a safe clean home.

Just some food for thought... Many people, including my dad, are literally voting for the 2nd coming of Jesus at the cost of the next generation. Maybe we don't want our kids to have anything to do with that fuckery but lack the financial means to do so.

chrismealy• 9 years ago

Some days it's robots taking all the jobs, other days it's who's going to take care of all the old people. Come on people, just pick one.

Unless you count hoarding canned food, you can't really save for the future. You can acquire claims on income in the future by buying stocks or bonds or whatever, but that income will have to be produced in the future, produced by young people working. Old people have always been taken care of by young people. The illusion of the financial system can't change that. There are relatively more older people now than there used to be, but on the whole that's a good problem to have, because people are living longer and have more control over their lives. The best way to deal with an aging population is to guarantee a decent standard of living for the young, so people don't have to wait until they're pensioners to enjoy income security.

rayiner4• 9 years ago

At least in the U.S., we can rationally worry about both things at the same time! Social Security is bankrolled by a tax on labor income. Robots, however, produce capital income. We could easily be in a position where millennials have limited employment because of automation but nonetheless carry the burden of supporting the baby boomers in retirement.

averagewall• 9 years ago

You seem to be contradicting yourself. Unemployed but working to support old people? That's employment. Not all jobs have to be in factories. Why can't elder care be a booming industry that sucks up all the unskilled labor left behind by automation? The customers are the very people who can afford it the most.

rayiner4• 9 years ago

I'm as salty about baby boomers as the next guy, but it's a bit ironic that millennials don't realize that they'll be screwing the next generation over even harder. We are in the position we are in now largely because baby boomers didn't have enough kids to support them in their retirement.[1] But millennials are having even fewer kids. When millennials in western countries can no longer work, who will take care of them? Can they count on an endless supply of young immigrants raised and educated on foreign taxpayers' dimes?

[1] In the past, people had children so someone would be around to take care of them in retirement. Financialization of that process decouples the specific children from the specific retirees, but does not otherwise change the basic dynamic that there has to be a working generation to provide for the retired generation. You can't eat money in your 401k.

flukus• 9 years ago

Not really, the biggest problem with the baby boomers aging was the "boom" part, there were a disproportionate number of people in that generation. Gen Y may be having less kids, but there will be less of them to support in retirement and the next generation might even get cheaper housing as the population shrinks.

nopinsight2• 9 years ago

By the time millennials retire, around 2045 and later, robots and AI are likely advanced to the level that they could take care of the old and produce most necessities of life. The labor needs of that future world would likely look quite different from what most of us envision now.

rayiner4• 9 years ago

2045 is about as far into the future as the first episode of "Seinfeld" is in the past. Unless a black swan event happens in AI development, the world will look pretty similar to how it does today.

usuallybaffled2• 9 years ago

I believe with will need way less people than in the past due to automation and robots.

ThrustVectoring• 9 years ago

Its difficult to have conditions that have Millennials both supporting aging Boomers and raising their own children. Not without lowering standards of living and care for one of the three groups.

bluthru2• 9 years ago

When millennials in western countries can no longer work, who will take care of them?

What does this question even mean? There isn't a 1:1 ratio of nursing aids to nursing home residents.

But millennials are having even fewer kids.

Thanks to the world the Baby Boomers helped create. Real wages have flatlined, careers being sold as more meaningful than families, and horrible maternity and paternity laws. Meanwhile, the wealth that a responsible couple generates is subsidizing the unemployed person who is on their fourth child. We basically live in a society that has inverted natural selection. That includes flooding the first world with people from the third world and pretending that we're all interchangeable and that the social conflicts created by multiculturalism aren't real.

metalliqaz2• 9 years ago

I'm going to go out on a limb and assume that both of us live in the "first world", as you say. Where is the flood of third world people? I have never seen this "flood" in my 35 years wandering around the US.

ck425• 9 years ago

We need to accept that the retirement model simple isn't sustainable. Either you live on less that your means while young and save for retirement yourself, or you work till you die.

rayiner4• 9 years ago

Unless you're saving canned food that doesn't solve anything.

mythrwy4• 9 years ago

Home values appreciating out of proportion to salary increases are another way this is occurring. Discussed a couple of weeks ago.

It's great someone who works as a bus driver bought a home 40 years ago and it's now worth a mint. For that person. For the young person wanting a home now it's a very bad situation.

techsupporter2• 9 years ago

I read an interesting comment thread on a Seattle-oriented forum the other day: It was a thread about some landlord something or other--the topic isn't all that important, just that it brought up the classic landlord-versus-tenant debate--and someone made the comment that a sizable contingent of landlords in Seattle are one- or two-unit (usually standalone house or townhouse, but sometimes condominium or duplex) owners renting out places where the landlord previously lived. The point was that tenants should be more predisposed to give "landlords" as a group a break because many landlords aren't corporate real estate trusts.

A person replied to take issue with that statement and made a what I thought was a good point. He or she pointed out that all of those houses that are being owned by a small-time landlord and subsequently leased out are houses that are out of the pool of available properties for people to own and, possibly, redevelop into more dense or different housing styles. Ownership and renting in this way contributes to the upward spiral of housing prices: a person has owned a house in an area for a while and then moves out. Instead of selling, that person rents out the house while, in all probability, having purchased another house in the same area. As the first house's mortgage is paid down by outside rent, the small-time landlord has even less incentive to sell because, hey, "free"[0] money. Lather, rinse, repeat for an entire metro area and it's just as good a contributor to tight owned housing availability as the specter of foreign investors swooping in or people moving from other regions of the United States. And it reduces the pool of houses that could be used for someone to buy[1] into a market.

0 - I know that being a landlord incurs costs and that not all landlords, especially small landlords, make money on the deal but many obviously do because to do otherwise would be financially foolish.

1 - There's a really good argument to be had about whether or not ownership of one's residence is a good thing for society at large. I happen to think that yes, it is, but that the pool of "culturally acceptable residences" must be expanded beyond "detached house with fenced yard, large driveway, and bountiful on-street parking directly in front of the structure." Point being, people want to have stability in where they live and there's a wide gulf between "5,000 square foot minimum lot size" and "downtown condominium high-rise" that is not being served in many metropolitan areas.

Frondo• 9 years ago

Can you provide the link to that thread/comment? It sounds like they've made the argument I've been trying to make to my peer group (and their parents, who explicitly encourage this "buy a house/never sell it, but rent out/etc" behavior)--but have done so elegantly.

I'd love to see how they put it, so I could explain to others why these schemes to "invest" end up hurting the city when they play out at large.

AnthonyMouse3• 9 years ago

A promise from the government to pay you something in 30 years is inherently a promise to take the resources from your children, because there is nowhere else for it to come from. It doesn't help anything to have the government hold its own bonds; then your children inherit the debt instead of the unfunded program. It's the same number of dollars no matter what you call it.

And you don't want governments holding other investment assets because the government choosing what to invest the money in would be the world's strongest corruption magnet.

Rather than reducing high borrowing levels, policy makers use financial engineering, such as quantitative easing and ultra-low or negative interest rates, to maintain them, hoping that a return to growth and just the right amount of inflation will lead to a recovery and allow the debt to be reduced.

This is a misapprehension of the relationship between debt and inflation. Inflation is how you reduce the real value of the debt. It's effectively a tax on dollars, and it reduces the debt on both ends: If the government creates new money then it can spend that instead of borrowed money, and if the value of the dollar goes down then the value of each outstanding dollar of debt goes down.

But none of that changes the problem with retirement benefits because, again, the government holding its own bonds is self-canceling. The only thing inflation might "help" there is to allow a reduction in real (inflation-adjusted) retirement payments without a nominal cut.

If you want the same real benefits then you need to collect that number of real tax dollars, and if you won't or can't collect that number of tax dollars then you have to pay lower benefits.

pmontra3• 9 years ago

A promise from the government to pay you something in 30 years is inherently a promise to take the resources from your children, because there is nowhere else for it to come from.

Not a big deal: those people helped their parents, their children will help them. It's fair and it's what happened for tens of thousand of years: people knew they must have children because without children they'll be pretty much without any support when old. However it works when the number of children is substantial. It can't work with 2 or 1 children per couple and that's where most of the western world is now.

mjevans2• 9 years ago

Yet increasing the population will also lead to either war, or the destruction of the environment to the point where none can survive.

majewsky2• 9 years ago

Not only the Western world. Countries like India, Indonesia and Iran all report about 2 children per woman already. https://ourworldindata.org/fertility/

omegaworks• 9 years ago

A promise from the government to pay you something in 30 years is inherently a promise to take the resources from your children, because there is nowhere else for it to come from.

I'm frankly surprised at the level of ignorance in these comments. Debt is not zero sum in every regard.

Debt in the service of investing in something that will provide a return is not bad debt. For example: Investing $1 into things like preschool programs returns benefit to society of $3-$7. [1] Programs like universal preschool access are no-brainers yet they meet intense resistance from austerity-pushers on both sides of the aisle.

1. https://www.washingtonpost.com/news/fact-checker/wp/2015/04/...

AnthonyMouse3• 9 years ago

The point isn't that the government should never borrow money, it's that it can't lend money to itself. It could easily be that there is a net benefit to society of collecting tax dollars and spending them on preschool, but you aren't adding anything by pretending the tax was to fund a retirement program even though the money was immediately spent on preschool.

The preschool program is independent of the retirement program and could exist without it with no change to anything except for the fiction that the tax revenue was for retirement and the debt for preschool instead of the other way around.

crdoconnor9• 9 years ago

"A promise from the government to pay you something in 30 years is inherently a promise to take the resources from your children, because there is nowhere else for it to come from."

If you die in 25 years and pass that wealth to your children then it becomes a promise to take resources from somebody else's children and give it to yours.

It's simply cementing wealth divisions across generations.

ajdlinux• 9 years ago

And you don't want governments holding other investment assets because the government choosing what to invest the money in would be the world's strongest corruption magnet.

IDK, sovereign wealth funds seem to work for quite a few countries

AnthonyMouse3• 9 years ago

Mostly countries with a positive balance of trade, minimal or no public debt and minimal regulatory capture, none of which is true in the US.

And if you actually wanted to do that, it would require deep cuts to other government programs, because the social security administration wouldn't be there to soak up government debt anymore, which would raise interest rates. The same tax dollar can't both be invested in stocks and "borrowed" by the general fund to pay for education or the military.

baybal25• 9 years ago

Put your money into a full reserve bank, there quite a few around. I have an account with one of such. It also makes sense to open a "metal account" in some offshore bank abroad (remember, US was prohibiting its citizens from buying gold less than 50 years ago)

lordnacho2• 9 years ago

What should have been done was to make some precautions for the inevitable. There was always a good chance at the start of the various welfare states in the last century that people would live longer.

Why didn't they say "we'll pay pensions to the oldest X% of the population" or "we'll pay x% of GDP to the oldest people, according to living standards of the time"?

Instead we have societies where people feel entitled to be pensioned at a specific age. And it's very hard to change that age, while at the same time they become a larger and larger voting block.

dmoo2• 9 years ago

Ireland raised the age at which people are entitled to a state pension. It's moving from 65 to 68. https://www2.deloitte.com/ie/en/pages/deloitte-private/artic...

lordnacho2• 9 years ago

Is the proportion of people being taken care of higher or lower than when the system came into being?

I get that a lot countries are aware of the issue, but moving a fixed age to another fixed age does what the article says: it kicks the can down the road.

GrumpyNl• 9 years ago

Not true, as long as we can keep the money printing machines working.

kartan• 9 years ago

Short term thinking pays off and has been favoured by evolution, so human beings have a strong bias to choose short term benefit over long term gains.

Local maximums, or even cul-de-sac paths that are good in the short term but fatal in the long one, are chosen by short term gain maximization.

To overcome this bias, we need better education of the general population - the ones that vote and choose our future - so they understand the situation.

About pensions, it is ridiculous to compare "working people"/"pensioners". The correct comparative is "production capacity"/"pensioners needs". Comparing the output of an employee from 1970 with a 2050s one (the future they talk about) makes no sense.

About climate change, and general environment protection, the article is spot on. We ripe the benefits while future generations pay the cost. That's the only reason we destroy so much to get so few, because we don't pay the cost.

groby_b• 9 years ago

I wonder if anybody ever has thought of a solution... why, we'd need massive growth (to increase the tax base), a reduced population, and the ability to completely eradicate some debts. As if you were removing the people who lent you money in the first place.

You know what fits that description? A bit of war. And that's exactly where we're heading. (Middle East is not going to get better. Refugee numbers will become staggering as climate change destabilizes even more countries. Russia has its eyes on Ukraine and the Baltic states. Europe is militarizing to counter that. Pakistan/India is about the same as it ever was - so, precarious balance, with nukes on hair trigger. China would like nothing more than a Greater Asian Co-Prosperity Sphere. North Korea is about as bonkers as the US)

perilunar• 9 years ago

Yeah, but we want to reduce the population old people, not young people. Maybe an intergenerational war.

tremon• 9 years ago

Strictly speaking, we want to reduce the ratio of nonproductive vs productive people. Culling the old is not the only way to do that, and certainly not the best.

(edit: and we definitely need better language. "nonproductive" need not be synonymous with "having an income to support oneself", since there's still many productive activities that are not rewarded monetarily)

polskibus• 9 years ago

Rent-seeking is getting stronger and stronger because money is getting cheaper and cheaper. Those with good credit lines get ahead of the poorer ones and force them to pay them rent. I wonder if a reset like 2007/2008 is coming.

mjevans2• 9 years ago

If there is a reset I hope it's actually effective at fully deflating the bubbles this time.

zanny4• 9 years ago

I think this is much closer to the issue. It is not about solvency of the global economy as a whole - that is absurd, there is so much loose capital floating around in corporate coffers and the stock market and HN is just a testament to how relatively loony ideas can still get millions in rounds.

The real issue is the dramatic wealth divide that has been growing worse over time, which bleeds into capital ownership by the rich as a means to extort rents from the poor. It doesn't matter what generation you are from - these debts exist not just to pay for past generations but to keep the current ones under foot of the wielders of the capital. Debt isn't just some evil force from the shadows, it is a business run for profit as the ultimate rent seeking, and is wholly intentional.

skybrian• 9 years ago

I'm skeptical of purely financial measures of this. It would be nice if we could distinguish between purely financial "savings" versus real-world actions that might actually make things better in the future.

For example, there's such a thing as perishable resources. You can't "save up" labor; if people are unemployed now (and not doing something useful like going to school), that doesn't mean there will be more labor available in twenty years; it's just gone. Sunlight or wind power not used now is gone; it can't be saved for later. And even the things that can be saved often have storage or maintenance costs.

Finance makes it seem like you can save for your retirement or pass on wealth to your children, and that's true for individuals but only to a limited degree for society as a whole; the labor you use in twenty or forty years will come from younger people who are working then. Call it a ponzi scheme if you like, but this is the only way it can work.

On the other hand, natural resources are the opposite; oil or natural gas can be left in the ground as long as you like, and it's cheaper to leave it where it is than to do anything else with it. There are also long-term investments in people (education in particular) that could pay off later with a better educated workforce. Instead of deferring infrastructure maintenance, we could do it before it's needed, possibly freeing up future labor to do something else. Scientific research done now can come up with new techniques that will always be useful.

Von_Jones• 9 years ago

Is it any wonder this is happening when the central organising feature of our political, economic and personal lives is a huge ponzi scheme? This reality has destroyed the possibility of changing a system to benefit all. This ponzi scheme is the housing market: since the late 90s this has ceased to be a true market, and instead became a pyramid scheme in which value growth and price is based on the expectation that money will be sucked in from new investors, not derived from the utility of house-ownership or expectation for yield. This is the very definition of ponzi - and it governs so much of our lives. Why are the young and the old so segregated in their voting? It's because they are either the beneficiaries of or the 'bigger suckers' in this state-sponsored fraud - and can be mobilised accordingly. Until the housing market is dealt with, it will be impossible for politicians to create policies which 'grow the pie', increasing wealth for all, rather than simply carving it up - governing by robbing Peter to pay Paul.

The only solution I can see if for the young to organise to boycott house purchase, but I am not yet sure how realistic this.

metalliqaz2• 9 years ago

Housing is just now starting to emerge from a huge correction. Despite all the bullshit surrounding housing, it is still a functioning market. (meaning, prices are set by scarcity and demand) There are still inequalities there but it's not nearly as big an issue as the debt discussed in the article.

TheCoelacanth• 9 years ago

prices are set by scarcity and demand

Scarcity which is artificially limited by zoning and demand which is artificially inflated through near-zero interest rates.

lpaone4• 9 years ago

I have a theory that may not be popular around here. I also probably have not thought this through and researched it enough, but I will throw it out there anyway. I would love to have it torn to shreds by someone who has studied economics or more likely this is something that has already been extensively researched.

It seems to me that real sustained economic growth cannot happen without population growth, at least the way things work right now. Efficiencies gained through technological innovation and financial manipulation cannot sustain growth indefinitely, they just smooth out the bumps and with population growth help increase the rate of economic growth. And without economic growth, we are going to keep running into these issues and others brought up in the article.

Look at Japan, no amount of economic/financial manipulation has really helped them. Their main economic issues stem from the fact that there are not enough young people.

Aside from epidemics/catastrophes, there has almost always been sustained population growth through human history. It is in our nature to multiply and expand. I feel this is why so many people are fascinated with space and space colonization.

The current demographic trends in western society is unprecedented and in my estimation, I do not think it will end well unless someone finds another solution, or these demographic trends are reversed.

Feel free to rip apart my theory. I would love to hear what someone with a better understanding of this area has to say.

ianai• 9 years ago

I think we covered this in my Econ courses.

flushandforget• 9 years ago

When you have population growth (or non-native settlers), they prop up the old. It's a pyramid scheme.

_pmf_2• 9 years ago

When you have population growth (or non-native settlers), they prop up the old. It's a pyramid scheme.

It's literally a pyramid scheme: the population pyramid is supposed to have a broad base, but today it's upside down.

usrusr• 9 years ago

And if it is not occasionally reset by natural catastrophes it will be reset by man-made ones. In the 1980ies we feared man, today we are blindly growing towards destruction (by population growth domestic or imported). Some people cite Japan as an example of failure, I see them as an example of sustainability: they abstain from the quick and easy wealth fix that could be had by pyramid-scheming.

beaconstudios• 9 years ago

I'm no historian but I believe that there is a precedent for the current demographic trends - the late Roman Empire. From what I've read, birth rates didn't sufficiently outpace infant mortality rates during the late days of Roman rule, which may have been a contributing factor to the fall of the Empire.

mattmanser2• 9 years ago

This is basically conventional wisdom.

Why do you think politicians say they will sort out immigration, but then encourage even more immigrants? They want more workers.

I am not so convinced, given that our jobs are all supposed to be automated soon, we shouldn't have to rely on more humans to grow economically.

In the UK they claim we need mass immigration for growth, but jobs that teenagers used to do are now being done by grown adults, so I don't believe it. We also apparently have terrible productivity compared to other countries. I think that if we stopped relying on extra humans, productivity would suddenlg rocket.

lpaone4• 9 years ago

How do you reconcile this with what is happening in Japan? Do you think huge amounts of automation would fix their problems? Isn't much of their manufacturing already automated?

ENTP• 9 years ago

Could this be a reflection of our monetary system (the fact that we cannot possibly repay all the money because there is interest that is owed to the lenders, and where does that extra interest come from? The lenders!)? This means we need more people to earn more money to pay it back ad nauseum leading to an exponential problem? I'm not an economic expert but believe the basis of the above is rooted in reality but happy to learn more if someone can correct me!

lucozade• 9 years ago

That's only true if the interest payment is larger than the income that can be made available to pay it.

If you live in Greece then, yes, this is a bit of an issue. The solution there is likely to be some form of writing down of the debt.

joyofdata2• 9 years ago

what you described is essentially a global ponzie scheme. and that's what it is at the bottom line - the growth feeds on itself - no more growth - everything crashes.

is that sustainable or even reasonable by any standard - the answer is an obvious "no". but it benefits the powerful.

stephen_g2• 9 years ago

No. The error that you have made is confusing stocks with flows. Your problem would be true under two circumstances - if all debts had to be paid at once, or if money disappeared when spent.

But when you introduce the time dimension, the system works. The money supply is a 'stock' of some quantity, but payments (principal and interest) occur over time, making them a 'flow'. Those payments will then generally be spent back into the system, which circulates (all expenditure is someone else's income). This circulation is measured as the 'velocity of money'.

So interest isn't a problem ultimately, but the increasing accumulation of wealth by the most wealthy may become more and more of an issue.

klodolph4• 9 years ago

Exponential population growth is fundamentally unsustainable. Given a population growth rate of about 2% per year, like it was in the 1960s, an average mass of 60 kg per person, current world population of 7 billion, and a total mass of the universe of 3x10^52 kg, we can calculate the amount of time before humans consume the entire universe, including dark matter. It's a little under 5000 years, far shorter than the record of human history.

So, this is a fact: we cannot grow exponentially for very long. Also a fact: humans have survived the vast majority of human history with near zero population growth, if we consider human history to be 200 millennia old and population growth to be a factor of a million during that time, average growth is 0.007% per year.

Economic growth is also the wrong thing to measure. Surely something else, like quality of life, would be more appropriate. You say that "no amount of economic/financial manipulation has helped [Japan]" but does Japan really need help, or are their citizens enjoying a relatively high quality of life?

lpaone4• 9 years ago

"...are their citizens enjoying a relatively high quality of life?' I would say yes.

To me, the question is: can their high quality of life be maintained if there is no economic growth? Is it possible to print money/borrow indefinitely to support this quality of life?

Especially with regards to the article, I think these are valid questions.

mozey• 9 years ago

calculate the amount of time before humans consume the entire universe

I've heard this same argument made using energy instead of mass. That article correlated economic growth with increased energy usage. It does make sense, our universe might be expanding but it is finite.

However, what if this is a social and not a physics problem? Maybe more and more new people are required to keep human social structures functioning optimally. Maybe the solution is virtual reality.

vacri4• 9 years ago

Given a population growth rate of about 2% per year, like it was in the 1960s, an average mass of 60 kg per person, current world population of 7 billion

Economic growth in developed countries is driven by population growth, and this is why they all have a decent amount of immigration, to sustain that growth. In developing countries, they can grow by development - adding more subsistence farmers doesn't really grow the economy.

Australia has just taken the record for the longest period without a recession (26ish years), and this has been done on the back of immigration - since 1999, we've increased our population by a quarter, and our birthrate is only replacement-level. Population growth in developed countries != population growth globally.

zurn• 9 years ago

Productivity growth per capita (= "economic growth even without population growth") has been happening since the industrial revoluation, and lately it's moved more and more into immaterial / less resource intensive domains.

You don't seem to present any arguments as to why it wouldn't happen without population growth. It has been rather self-sustaining.

(A different questionis whether we should aim for economic growth - given our biggest problem now is climate change).

spin• 9 years ago

In college I had an econ friend who said that there's basically only three ways to grow an economy: more workers, better technology or more capital.

If you look at technology, then I think "yes!" it has improved the economy. Look at engines and trains and telecommunications. The first world economy today, per person, is rip-roarin' compared to 100 years ago.

Many western economies haven't noticed the decline in the birth rate yet because of so many immigrants. Japan is unique in that they are a modern country, with a declining birth rate, but very low immigration.

Markoff2• 9 years ago

doesn't declining population mean also lower expenses on infrastructure and everything?

lentil_soup4• 9 years ago

This video seems relevant: https://www.youtube.com/watch?v=FACK2knC08E

According to Hans Rosling we've reached "peak child", meaning we're almost at 2 children per woman globally. This means population will continue to grow for a few years as globally there are more children than adults but will stabilize after that around the ~11 billion mark. And as long as we stay at that "peak child" number we won't go any further. I really recommend his videos if you haven't seen them.

tmnvix• 9 years ago

My intuition tells me that productivity per capita has been increasing; we have not been relying on population growth alone to grow the economy.

The catch is that the increased production is not distributed equitably. For the average (more productive) worker, the things that they need such as health and housing are not any 'cheaper'. So where is their 'share'?

As productivity increases, credit expands to capture it. This is how, ultimately, those with the capital end up with the increased productivity.

Just a thought.

OliverJones3• 9 years ago

Is economic growth necessary? Is it valid that no growth / slow growth is the same thing as stagnation? What does a world look like when the population is staying roughly constant, with births and deaths in balance?

Japan has been in a situation like that for a while now. Instead of poo-pooing it as a long recession, maybe the rest of the world should try to learn from it.

tu7001• 9 years ago

Apparently, we are too stupid to maintain civilization...

ucontrol• 9 years ago

While your comment may seem simplistic, as years pass and as I study human history in more depth, I'm afraid that I'm beginning to nurture that exact sentiment as of late. It seems that Western civilization was not an inevitability, but a lucky roll of dice (or unlucky, depending on who you ask).

On average, we are not as intellectually capable as our civilizational accomplishments may indicate, quite the contrary. Seeing the missteps that we keep making, looking at our shortsightedness and our inability to act collectively towards long-term prosperity.. It's just depressing.

What bothers me the most is the degree of such incompetence. It should't be so widespread.

roflc0ptic• 9 years ago

I know we don't on usually quote poetry on HN but there's some apropos Bad Religion - "I've got this one problem where I live forever // I've got just a short time to see."

The human mind is not apparently built for thinking at the scales (sizes, time frames) at which humanity operates. The limited distribution of competence is an amoral phenomenon - as a first approximation, I like to think about it as a natural consequence of limited information transfer between generations. Should or shouldn't is beside the point.

kaonashi2• 9 years ago

I liked this piece which touches on many of these issues: http://www.ianwelsh.net/the-basic-psychological-structure-of...

Tepix• 9 years ago

Why are pension funds not changed (gradually) so that i get my own money back (+interest) instead of paying the pension for current retirees?

It's blatantly obvious that not changing the system will lead to issues as the populace grows older.

kuschku• 9 years ago

That’s how they worked originally. WWII killed that concept. Now in the past decades people switched to private pension funds, which do that, but that doesn’t fix the inherent issues with the system.

JonCox• 9 years ago

Nom nom nom

tempodox2• 9 years ago

This effect isn't new. Before antiquity, Greece had lush forests. Then, they cut off all the trees to build ships so they could fight their wars and conquer the world. And Greece has been a desert ever since.

OlivierKessler• 9 years ago

Theory which is largely challenged today.

tempodox2• 9 years ago

Where would they have taken the wood for their ships from?

OliverJones3• 9 years ago

Hey, fellow older folks in the US! Wanna do your part to help deal with this problem? Wanna do it without all the trouble of getting organized?

Use some of your wealth to pay off the education loans of a younger friend or colleague.

freeflight10• 9 years ago

This is especially bad in Germany where the introduction of the Euro pretty much split the earning population in two.

Around 1990 the average retirement age in Germany was 60 years, retirees also got way more money (they still do) because back then people still earned proper wages and the retirement is based on prior income.

Since the introduction of the Euro real wages in Germany have kept on stagnating while living costs kept rising and live expectancy also increased.

This has lead to the absurd current situation where (old) retirees make up the bulk of the upper-income levels in Germany, while younger generations are not even sure they will be getting any retirement at all down the line, as German government keeps increasing the retirement age (67 years now, estimated target being at least 69 years) while decreasing the amount of retirement money people actually get.

The worst part is that a lot of this is based on the naive assumption that life expectancy is gonna keep on increasing and people can stay "productive for longer", like we are all gonna be able to work till 70+ by 2030. But nobody answers the question that actually matters in that regard: Where and as what are all those people supposed to work?

And why should any businesses hire a 60+-year-old guy vs hiring from a flood of overqualified, eager, and cheaper young folks?

aramas• 9 years ago

Looking at youth unemployment rate (44%, 38%, and 25% in Spain, Italy and France, respectively), you will find how serious this issue is. It's not only about young people's job skills.

return02• 9 years ago

There's also the sociocultural aspect of it. Weak and economically dependent youth -> conservative values, avoidance of confrontation with parent generations. There is no such thing as the rebelious spirit past generation, and this is prominent in millenials.

tomohawk• 9 years ago

I had a conversation with a retired person. They were upset that they had to pay taxes to support schools. Yet, they expected me to pay for their retirement in a system that I'll likely never see a penny of. This retiree had an income well above the median, and was at the same time getting full social security benefits.

Regardless of age, people will take and take if they're allowed. Unfortunately, we've built "safety nets" that enable this behavior.

clarkmoody• 9 years ago

This is a fundamental problem of democracy: a voting minority uses the government to extract wealth from other portions of the population.

Just look at the comments in this thread. Tons of "us" vs "them" when talking young vs old. We would not be divided without the government exacting the will of the voters on portions of the population for the benefit of others.

Instead of uniting us, democracy divides us.

nickthemagicman3• 9 years ago

Austerity NEVER works. It's small minded and looks solely at the debt instead of the investment.

IF we get debt for a billion dollar highway system but that highway system helps the country make billions of dollars over the time of the loan. That is called an incredible investment.

Greece, Kansas, Louisiana, etc have austerity governments and they are falling apart.

Investment pays off dividends...whereas austerity kills.

Scea913• 9 years ago

Greece is not falling apart because of austerity government but but because of the ones before that which were the opposite.

nickthemagicman3• 9 years ago

Ok..given that's the case. There are lots of governments who run high debt levels and aren't in that quandry.

The debt isn't the problem. It's misuse of the debt that's the problem.

Even most companys run standard levels of debt every quarter, because borrowing is a very powerful tool IF USED CORRECTLY.

So, there's a significant distinction there, the I feel less educated and less economically inclined people fail to grasp....

Debt can be a very positive tool if used correctly.

mcv4• 9 years ago

A couple of years ago there was a discussion in Netherland about increasing the retirement age from 65 to 67 because babyboomers were about to retire and the working population that would pay for it would shrink. (Also because people live longer; increasing retirement age is not unreasonable in itself.)

But because increasing retirement age just in front of people who were just about to retire would be too big a shock, it was decided to increase it slowly over a period of years. The end result is that all the babyboomers can still retire at or near 65, but it's the younger generations that have to keep working longer to pay for the boomers' retirement.

In the mean time, the mortgage crisis has undermined pension funds, which in some cases meant everybody had to chip in extra so the babyboomers could retire the way they were originally promised.

I have no idea where this is going, but I'm glad my retirement savings are actually my money rather than part of a fund that can be plundered or mismanaged by others. Dutch retirement funds are among the strongest in the world, but these past couple of years have seriously hurt people's trust in them.

I'm all for solidarity, but the solidarity has been a bit one-sided lately.

greedo• 9 years ago

Just because it's "your money" now, doesn't mean it will stay that way permanently. In the US during the last decade, there's been talk of plundering 401k accounts...

mcv4• 9 years ago

That's exactly what I'm talking about. When it's my money, that plundering becomes theft. When it's not actually my money until it's paid out, I have less control over it and rules may be changed so it can be plundered.

In the past I've heard plenty of stories about American companies looting retirement funds in ways that would absolutely be illegal in Netherland, so even if I'm part of a big fund, I'm probably better protected than an American. But even that protection might not be enough if I can be required to pay extra.

ryan606• 9 years ago

The baby boom generation, as well as the "Greatest" generation before them, have saddled our future generations with huge liabilities. Sadly, not every younger Gen X'er, Gen Y'er, Millennial, or Gen Z'er realizes the magnitude of the debt left behind -- and more importantly that it reflects future tax increases or government services that won't be able to be provided. The only hope is that the current generations will have accumulated enough personal assets to pass along to their kids and grandkids to offset some of this deficit.

jerianasmith• 9 years ago

I don't think old are really eating the young. To me, this intergenerational conflict is exaggerated. As technology improves and so is human life span, we all have to face this when we become old.

fithisux• 9 years ago

The article cites no scientific evidence (references), follows no scientific methods and can be regarded as biased. To strengthen my point, the articles compares 5.3 / retired in 1970 vs 1.6/retired in 2050 without taking into account automation or scientific / technological progress. The analysis is therefore unsound.

kaonashi2• 9 years ago

More like the rich are eating the poor.

The Old Are Eating the Young

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