while retirees divest, downsize, budget
and draw income and healthcare benefits,
what’s going to happen when more retirees want
what fewer workers may not be able to deliver?
It is incumbent on government to convey to future retirees
that the real resources currently promised to be available on retirement,
will not be fully forthcoming.
Alan Greenspan
…the models are suggesting that the shrinkage in the high savings population cohorts and an expansion in the retired population will alter supply demand dynamics…in a profoundly negative manner.
The unfavorable shift in dependency ratios, combined with sharply increased spending on pensions and healthcare is likely to cause a sustained deterioration in primary fiscal balances and a continuous increase in government debt to GDP ratios.
The common assumption that future savings flows from the large developing economies will be a ready source of finance for the ageing advanced economies is most probably flawed
…It is highly implausible to believe that Africa, the Middle East and India will be capable of funding the rest of the world’s growing population of retirees.
Because the rise in old age dependency ratios is common to virtually all significant economies, the idea that a redistribution of global savings flows from surplus to deficit nations might mitigate the impact of ageing on bond markets is a false comfort.
…Over the next two decades, the boomer generation will age into retirement and run down their accumulated savings. An era of capital abundance will gradually turn into an era of capital scarcity. Government debt burdens will rise sharply…
Given the broad international context for these trends, with similar developments afflicting almost all the world’s major economies, the means by which the government debt burdens are eventually curtailed is unclear.
…yields are likely to require a significant rise in risk premia to cover the eventuality of default, either outright or through inflation.
Tim Bond
Via Alphaville
1 comment:
The solution is simple. Social Security and Medicare are Ponzi Schemes. Or more precisely, Welfare for the elderly. The government has sold the American people a bust just as did Madoff and the people who swallowed the lies unfortunately are going to have to take the loss. The fact is anyone who paid into Social Security has received back every cent put in after only two years of retirement. At that point it becomes welfare---taking money from one and giving it to another.
The Congress is going to have to pick a number and anyone having an income above that number will not receive Social Security. Period! Cut off!
Cut out Medicare. Insists that all people have to purchase their own health insurance. (I sincerely hope for a rational health care reform package based on the Republicans model) Now since health insurance for the elderly is expensive and the government intervention in the health care industry by foisting Medicare on people has made the cost escalate beyond the stratosphere then the government will have to help people purchase their own insurance by putting those who cannot afford it on a sliding scale of support based on their income and costs of the insurance they will have to purchase, and this based on their individual needs. Many in this group will have preexisting conditions. Those on the lowest level of income must be put in an expanded Medicaid. This is a sad adjustment but has to be until it is worked out of existence by the death of the current and some future retirees. With reform the younger workers will have their own insurance as they age and retire. (I would have had my own if government intervention had not priced me out of the market. I hate and resent the fact that my government has forced me to take Medicare because I can not afford the insurance they helped to create!)
This will be a handship on the elderly and retired for now and into the future, but we have to accept that the burden of carrying us the elderly is a great burden on the young workers today and into the future. No one is going to like this or get the bigger piece of cake. In fact, we are all going to be reduced to crumbs now for the sake of the future of our nation and our children. We created this problem and now we are the ones who must pay our bills and not pass them on to our grandchildren! BB
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