Languish.org

How long can such a situation last without some sort of radical revolution or are Spaniards to apathetic and depressed even for that?

http://www.telegraph.co.uk/news/worldnews/europe/spain/9044897/Spains-lost-generation-youth-unemployment-surges-above-50-per-cent.html

QuoteSpain's lost generation: youth unemployment surges above 50 per cent
More than half of young Spaniards are out of work, according to fresh statistics, signalling a lost generation that has been hit hardest by Spain's economic woes, as the total number of unemployed surged above five million.

The number of 16-24 year old Spaniards out of work rose to 51.4 per cent in December, more than double the European Union average, according to a report by Spain's National Statistics Institute. The national unemployment rate hit 22.85 per cent, the highest rate in nearly 17 years and the current highest in the industrialised world.

Spain's young have been dubbed 'generacion cero' or 'the ni-nis' – neither in work nor full time education- and for many their only hope of seeking a better future is moving abroad, sparking fears of a brain drain.

"This is the least hopeful and best educated generation in Spain," said Ignacio Escolar, author of the country's most popular political blog and former editor of the newspaper Publico. "And it's like a national defeat that they have to travel abroad to find work."

When the crisis began in 2008, Spain's under-25 unemployment rate was below 18 per cent but it has nearly tripled within four years as Spain's housing boom collapsed and it sank into recession.

Young Spaniards are now living in the family home longer than ever before, pushing the average age of independence from their parents to well into their thirties.

"These people are delaying their advance into adulthood. It's a very scary time for young people," said Sara Elder an economist with the International Labour Organisation (ILO) which published a report into youth unemployment around the world.

"They find the path that worked for their parents is not working for them."

The ILO report, published last October, warned that the consequences of mass youth unemployment could be dire.

"Increased crime rates in some countries, increased drug use, moving back home with the parents, depression – all of these are common consequences for a generation of youth that, at best, has become disheartened about the future, and, at worst, has become angry and violent," it said.

Spain already has one of the highest rates of cannabis and cocaine usage among its young in western Europe.

The botellon, the social activity for younger people of drinking alcohol in public areas such as the streets, has also increased in popularity leading to police clampdowns.

Young Spaniards led the protests throughout last summer, setting up camps in plazas across Spain in the movement that became known as "Los Indignados" – the Indignant ones.

They complain that even a university degree leaves no guarantee of finding work.

"When you go to university, you develop very high expectations, and then you leave and get a reality check," says Tomás Muñoz, a 25-year old graduate of Alicante University and a spokesman for the Juventud Sin Futuro (Youth without a future) platform.

Analysts warn that youth joblessness could have a devastating effect on a nation that needs a dynamic young workforce to help economic recovery and lead Spain out of recession.

"It's a problem not just for them, but for all of us," believes economics professor Gayle Allard from the Instituto de Empresa in Madrid.

"This is the generation that will be paying for the welfare state and pensions in the future. If they can't get started with relatively secure, well-paying jobs, start to put away some savings, start to accumulate assets, start paying into the welfare system, where does that leave the rest of us?"

Quote
"This is the generation that will be paying for the welfare state and pensions in the future. If they can't get started with relatively secure, well-paying jobs, start to put away some savings, start to accumulate assets, start paying into the welfare system, where does that leave the rest of us?"

Way to focus on what's important, Mr. Gayle Allard. That, of course, being how are you going to exploit these kids for your nest egg if they have no money.

That's not including those in full time education? :o
Wow...
Most Spanish people I know are doing a phd or some other form of staying in uni whilst they look for a job. They say this is pretty common and it certainly makes sense to me, better to be doing something and keeping yourself busy than just lounging around. If these people are excluded from the stats.....

QuoteWay to focus on what's important, Mr. Gayle Allard. That, of course, being how are you going to exploit these kids for your nest egg if they have no money.

Myeh, its an alright argument; lets old people, even those whose own kids are fine, see they have a vested interest in the situation being resolved.

I am going to start stocking up on firearms and non-perishable food.

Quote from: MadImmortalMan on March 08, 2012, 07:24:18 PM

Quote
"This is the generation that will be paying for the welfare state and pensions in the future. If they can't get started with relatively secure, well-paying jobs, start to put away some savings, start to accumulate assets, start paying into the welfare system, where does that leave the rest of us?"

Way to focus on what's important, Mr. Gayle Allard. That, of course, being how are you going to exploit these kids for your nest egg if they have no money.

:D I saw a political cartoon recently which depicted a bunch of kids sitting in a circle inside a sandbox and one of them saying "I heard they had us so we can pay for their pensions."

Quote from: MadImmortalMan on March 08, 2012, 07:24:18 PM
Way to focus on what's important, Mr. Gayle Allard. That, of course, being how are you going to exploit these kids for your nest egg if they have no money.

I think it is important.  The welfare state's a triumph of the twentieth century but it isn't sustainable with large-scale unemployment for a very long time.  If this goes on we could have a generation not in work enough to pay for pensions and a generation ageing without sufficient private pension provision, but coming cuts to the state pension.

I think it's especially difficult in countries like Spain, Italy and Greece (from what I understand anyway) where the welfare state is incredibly tilted towards retirees as opposed to the unemployed or other 'younger' benefits.

No vote for over 70s!

Quote from: Sheilbh on March 09, 2012, 02:41:27 AM

Quote from: MadImmortalMan on March 08, 2012, 07:24:18 PM
Way to focus on what's important, Mr. Gayle Allard. That, of course, being how are you going to exploit these kids for your nest egg if they have no money.

I think it is important.  The welfare state's a triumph of the twentieth century but it isn't sustainable with large-scale unemployment for a very long time.  If this goes on we could have a generation not in work enough to pay for pensions and a generation ageing without sufficient private pension provision, but coming cuts to the state pension.

I think it's especially difficult in countries like Spain, Italy and Greece (from what I understand anyway) where the welfare state is incredibly tilted towards retirees as opposed to the unemployed or other 'younger' benefits.

How can it be a triumph if it is on the high road to hell after a few decades?

Full adulthood is reached in the early 30s followed by retirement in the early 50s  :hmm:

The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

Spain's unemployment was pretty bad before the depression started IIRC; there are structural reforms that would help even if the depression continues.

 Choose your own adventure, bailout edition:
    http://crookedtimber.org/2012/02/16/so-what-would-your-plan-for-greece-be/

Quote from: Phillip V on March 09, 2012, 02:05:32 AM
I am going to start stocking up on firearms and non-perishable food.

I am going to start stocking up on waterlegs and highly perishable food.

Quote from: Richard Hakluyt on March 09, 2012, 03:11:32 AMThe root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think there's a cultural element too.  Greece, Spain and Portugal all developed their modern welfare state relatively late - after the dictatorships - and Italy's is from what I understand distinctive.  They all spend far less on it than Northern European countries.  As a % of spending and of GDP both Portugal and Spain have a smaller welfare state than Britain, Italy and Greece are below the EU average and way below the Northern Europeans.  Within the EU Mediterranean countries, on average, spend less on welfare than the Anglo-Saxon, Continental or Scandinavian welfare systems.

But it's an area that needs a lot of reform really.  From what I understand they all emphasise payments to the elderly while having very weak, or low provision for younger people - such as unemployment, housing, childcare, family benefits.  Over 50% of their welfare bill goes in pensions, while in the other systems that's somewhere between 33-40%.  The cultural element is that I think this is perhaps because it's more normal for families to provide support in these societies.  So the generosity to the elderly was in lieu of generosity to young people, but they'd be more likely to stay at home, help with the family and so on. Though I could be wrong on that.

But it does mean that the system is more exposed to the problems of an ageing population - especially in Italy and Greece with lower birth and lower immigration rates.  I think the EU studied the various welfare models in Europe and found the Mediterranean one least equitable and least encouraging of efficiency, which is a shame and surprising given that it was designed later than the other major systems.

QuoteSpain's unemployment was pretty bad before the depression started IIRC; there are structural reforms that would help even if the depression continues.

I agree.  But I think the pay off has to be that the EZ doesn't go mad about their deficits in the short-term.  This was a point Martin Wolf made in his column this week:
http://m.irishtimes.com/newspaper/finance/2012/0307/1224312912841.html?via=rel?via=rel

Quote from: Sheilbh on March 09, 2012, 03:30:58 AM
I think the EU studied the various welfare models in Europe and found the Mediterranean one least equitable and least encouraging of efficiency, which is a shame and surprising given that it was designed later than the other major systems.

Quote from: Sheilbh on March 09, 2012, 03:30:58 AM
I think there's a cultural element too.

:P

cue (sorry Tim, que) in angry Spaniards in 3... 2... 1...

Quote from: MadImmortalMan on March 08, 2012, 07:24:18 PM

Quote
"This is the generation that will be paying for the welfare state and pensions in the future. If they can't get started with relatively secure, well-paying jobs, start to put away some savings, start to accumulate assets, start paying into the welfare system, where does that leave the rest of us?"

Way to focus on what's important, Mr. Gayle Allard. That, of course, being how are you going to exploit these kids for your nest egg if they have no money.

It's also painfully obvious that that person doesn't really know the Spanish situation at all, as I don't think that young people over here had secure and well paying jobs anytime in the last 20-30 years.  :lol:

Quote from: Tamas on March 09, 2012, 03:44:42 AM

Quote from: Sheilbh on March 09, 2012, 03:30:58 AM
I think the EU studied the various welfare models in Europe and found the Mediterranean one least equitable and least encouraging of efficiency, which is a shame and surprising given that it was designed later than the other major systems.

Quote from: Sheilbh on March 09, 2012, 03:30:58 AM
I think there's a cultural element too.

:P

cue (sorry Tim, que) in angry Spaniards in 3... 2... 1...

Why should we? It's obvious that there are cultural elements in the way that policies are designed and implemented in different countries, and it's true that in Spain and other countries the policies regarding welfare are biased towards one sector of the population.

Quote from: Richard Hakluyt on March 09, 2012, 03:11:32 AM
The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

Solution: eat the elderly. They're a bit tough but nothing slow cooking won't cure.

I know this is as much of an unreal utopia as it could ever  be right now, but I keep wondering if all these economic and demographics processes, at least in Europe, are leading us back toward the "one parent works, the other stays home with the kids" model. I am not saying man and woman because we might do this without a backtrack in culture and civilization.

If you simplify things down to the barest level, there are two main issues:
-not enough jobs
-not enough children

Having one half of the population abandoning the jobmarket to instead raise more children could solve both. :P

Again, I know this is impossible in the foreseeable future due to costs of living vs individual income levels, but still, I wonder if this will be the end result of all this.

Quote from: Tamas on March 09, 2012, 04:32:36 AM

If you simplify things down to the barest level, there are two main issues:
-not enough jobs
-not enough children

Having one half of the population abandoning the jobmarket to instead raise more children could solve both. :P

That's from a society point of view.  From an individual household's point of view, the security offered by having two incomes is hard to replace. 

Quote from: Monoriu on March 09, 2012, 05:06:32 AM

Quote from: Tamas on March 09, 2012, 04:32:36 AM

If you simplify things down to the barest level, there are two main issues:
-not enough jobs
-not enough children

Having one half of the population abandoning the jobmarket to instead raise more children could solve both. :P

That's from a society point of view.  From an individual household's point of view, the security offered by having two incomes is hard to replace.

Do not underestimate the pressure of society in determining what is good for you.

QuoteTyler Durden: My dad never went to college, so it was real important that I go.
Narrator: Sounds familiar.
Tyler Durden: So I graduate, I call him up long distance, I say "Dad, now what?" He says, "Get a job."
Narrator: Same here.
Tyler Durden: Now I'm 25, make my yearly call again. I say Dad, "Now what?" He says, "I don't know, get married."

Quote from: Monoriu on March 09, 2012, 05:06:32 AM
That's from a society point of view.  From an individual household's point of view, the security offered by having two incomes is hard to replace.

In which case it might be wise for the government to institute policies which encourage stay-at-home parenting.

Quote from: Monoriu on March 09, 2012, 05:06:32 AM

Quote from: Tamas on March 09, 2012, 04:32:36 AM

If you simplify things down to the barest level, there are two main issues:
-not enough jobs
-not enough children

Having one half of the population abandoning the jobmarket to instead raise more children could solve both. :P

That's from a society point of view.  From an individual household's point of view, the security offered by having two incomes is hard to replace. 

Thats where the state should step in.

No. It will take care of itself. Social engineering is bollocks.

Quote from: Tamas on March 09, 2012, 04:32:36 AM
If you simplify things down to the barest level, there are two main issues:
-not enough jobs
-not enough children

Having one half of the population abandoning the jobmarket to instead raise more children could solve both. :P

I think this is happening socially.  There's far more pressure on women to give up their jobs and have their entire lives defined by being or becoming a mother.  That trend along with lauding a certain variety of promiscuity and dressing like a wet dream as sexual liberation make me suspicious that a lot of what people describe as post-feminism looks a lot like pre-feminism mixed with what men would like.  I think we probably need a big dose more of feminism.

But I don't think this is the solution, not least because the most economically successful bits of Europe are the ones that have very high rates of female work participation (across age groups) and provide a lot of support for workers with children.  It's not going to help with the not enough jobs either because that's a bit lump of labour.  Simply removing that much productivity and demand from the economy would be dreadful.

Quote from: Tamas on March 09, 2012, 05:13:17 AM

Do not underestimate the pressure of society in determining what is good for you.

The real problem is that what is good for the individual and what is good for society are different.  As a society we need more babies.  As an individual I refuse to have any  :P

Quote from: Monoriu on March 09, 2012, 05:34:37 AM

Quote from: Tamas on March 09, 2012, 05:13:17 AM

Do not underestimate the pressure of society in determining what is good for you.

The real problem is that what is good for the individual and what is good for society are different.  As a society we need more babies.  As an individual I refuse to have any  :P

Yes, but you are getting a lot of social pressure because of that. Most people brake under it. Some brake too late.

The ones who don't, they are lucky. :P

Quote from: Sheilbh on March 09, 2012, 05:27:40 AM
  That trend along with lauding a certain variety of promiscuity and dressing like a wet dream as sexual liberation make me suspicious that a lot of what people describe as post-feminism looks a lot like pre-feminism mixed with what men would like.  I think we probably need a big dose more of feminism.

Quiet, you.

Quote from: Tamas on March 09, 2012, 05:44:43 AM

Quote from: Monoriu on March 09, 2012, 05:34:37 AM

Quote from: Tamas on March 09, 2012, 05:13:17 AM

Do not underestimate the pressure of society in determining what is good for you.

The real problem is that what is good for the individual and what is good for society are different.  As a society we need more babies.  As an individual I refuse to have any  :P

Yes, but you are getting a lot of social pressure because of that. Most people brake under it. Some brake too late.

The ones who don't, they are lucky. :P

I am sure that most parents would disagree with you and tell you that having kids was one of the best decision in their lifes.

Quote from: Tamas on March 09, 2012, 04:32:36 AM
I know this is as much of an unreal utopia as it could ever  be right now, but I keep wondering if all these economic and demographics processes, at least in Europe, are leading us back toward the "one parent works, the other stays home with the kids" model. I am not saying man and woman because we might do this without a backtrack in culture and civilization.

If you simplify things down to the barest level, there are two main issues:
-not enough jobs
-not enough children

Having one half of the population abandoning the jobmarket to instead raise more children could solve both. :P

Again, I know this is impossible in the foreseeable future due to costs of living vs individual income levels, but still, I wonder if this will be the end result of all this.

Your conclusions are all wrong, probably thanks to your ideology. The parts of Europe with extensive social states are more successful than those without it and with some exceptions like Germany also have relatively healthy fertility numbers and public finances.

Quote from: Tamas on March 09, 2012, 05:20:51 AM
No. It will take care of itself. Social engineering is bollocks.

:huh:
Sweden and France saw large increases in their birth rate when they set in place a few reforms to make having a kid easier.
Such things as paternity leave clearly do work.

Quote from: Zanza on March 09, 2012, 06:20:33 AM

Quote from: Tamas on March 09, 2012, 05:44:43 AM

Quote from: Monoriu on March 09, 2012, 05:34:37 AM

Quote from: Tamas on March 09, 2012, 05:13:17 AM

Do not underestimate the pressure of society in determining what is good for you.

The real problem is that what is good for the individual and what is good for society are different.  As a society we need more babies.  As an individual I refuse to have any  :P

Yes, but you are getting a lot of social pressure because of that. Most people brake under it. Some brake too late.

The ones who don't, they are lucky. :P

I am sure that most parents would disagree with you and tell you that having kids was one of the best decision in their lifes.

Of course. :) I was just giving a nod to the anti-breaders of Languish, I am not one of them. :P

Quote from: Zanza on March 09, 2012, 06:20:33 AMI am sure that most parents would disagree with you and tell you that having kids was one of the best decision in their lifes.

I'm sure all the people who praise their past decisions (which they invested a lot of money and effort into, where there is no obvious benefit from and that cannot be reversed without losing the entire investment) as "one of the best decisions in their life" are always 100% truthful.

It's right there with marriage, ENRON stocks and taking a 45 year long mortgage at the height of the real estate bubble.

Quote from: Martinus on March 09, 2012, 07:52:19 AM

Quote from: Zanza on March 09, 2012, 06:20:33 AMI am sure that most parents would disagree with you and tell you that having kids was one of the best decision in their lifes.

I'm sure all the people who praise their past decisions (which they invested a lot of money and effort into, where there is no obvious benefit from and that cannot be reversed without losing the entire investment) as "one of the best decisions in their life" are always 100% truthful.

It's right there with marriage, ENRON stocks and taking a 45 year long mortgage at the height of the real estate bubble.

don't forget suckling on toes

That's where euthanasia for the old should come into play.

Instead they import cheap labor from the Third World who will end up destroying what will left of the welfare state. <_<




G.

Quote from: Tamas on March 09, 2012, 07:55:35 AM
don't forget suckling on toes

Doesn't seem that would require much of an investment. Heck, if you're limber enough you could use your own toes.

Quote from: Sheilbh on March 09, 2012, 05:27:40 AM
I think this is happening socially.  There's far more pressure on women to give up their jobs and have their entire lives defined by being or becoming a mother.  That trend along with lauding a certain variety of promiscuity and dressing like a wet dream as sexual liberation make me suspicious that a lot of what people describe as post-feminism looks a lot like pre-feminism mixed with what men would like.  I think we probably need a big dose more of feminism.

Huh?  Women's education and incomes are going up all over the place.  Where exactly is this trend playing out?  Heck more women than ever make more than their husbands.

Quote from: Martinus on March 09, 2012, 02:32:51 AM

Quote from: MadImmortalMan on March 08, 2012, 07:24:18 PM

Quote
"This is the generation that will be paying for the welfare state and pensions in the future. If they can't get started with relatively secure, well-paying jobs, start to put away some savings, start to accumulate assets, start paying into the welfare system, where does that leave the rest of us?"

Way to focus on what's important, Mr. Gayle Allard. That, of course, being how are you going to exploit these kids for your nest egg if they have no money.

:D I saw a political cartoon recently which depicted a bunch of kids sitting in a circle inside a sandbox and one of them saying "I heard they had us so we can pay for their pensions."

An Austrian insurance had an ad campaign that showed a toddler's face with the words "I'm not a 'pension plan'!"

Quote from: Martinus on March 09, 2012, 07:52:19 AM
I'm sure all the people who praise their past decisions (which they invested a lot of money and effort into, where there is no obvious benefit from and that cannot be reversed without losing the entire investment) as "one of the best decisions in their life" are always 100% truthful.

It's right there with marriage, ENRON stocks and taking a 45 year long mortgage at the height of the real estate bubble.

I have no idea what you are babbling about.  People regret bad decisions all the time.

Quote from: Syt on March 09, 2012, 08:56:40 AM
An Austrian insurance had an ad campaign that showed a toddler's face with the words "I'm not a 'pension plan'!"

Especially since they cannot get jobs.  Sort of hard to pay into the system that way.

Seriously I am baffled how a system with early retirement and low birthrates can have no work for anybody.  Are robots running all of European businesses or something?

Quote from: Valmy on March 09, 2012, 08:59:20 AM

Quote from: Syt on March 09, 2012, 08:56:40 AM
An Austrian insurance had an ad campaign that showed a toddler's face with the words "I'm not a 'pension plan'!"

Especially since they cannot get jobs.  Sort of hard to pay into the system that way.

Seriously I am baffled how a system with early retirement and low birthrates can have no work for anybody.  Are robots running all of European businesses or something?

Robots do industry work, Muselmen do other work.

Quote from: Peter Wiggin on March 09, 2012, 05:58:58 AM

Quote from: Sheilbh on March 09, 2012, 05:27:40 AM
  That trend along with lauding a certain variety of promiscuity and dressing like a wet dream as sexual liberation make me suspicious that a lot of what people describe as post-feminism looks a lot like pre-feminism mixed with what men would like.  I think we probably need a big dose more of feminism.

Quiet, you.

I have to admit I do not get the idea women do not want sex and any suggestion they do is just what men want.   Besides last I checked male dominated societies traditionally repress and control female sexuality so I do not get that bit.  I mean the big controversy over here right now is conservative men calling women 'sluts' after all so they do not seem to want it that much.  But I understand feminists tend to disagree with each other on this topic.  I always thought the 'anti-sex' feminists was just traditional American puritanism coming out but maybe not if Sheilbh feels that way.  Not that he speaks for feminism or anything but he seems to keep up with and have an interest in it.

Feminists belong to the age-old "women's sexuality must be controlled because women are unable to make decisions about sex themselves" crowd. I think society can survive without them.

Quote from: Tamas on March 09, 2012, 07:47:11 AM

Quote from: Zanza on March 09, 2012, 06:20:33 AM

Quote from: Tamas on March 09, 2012, 05:44:43 AM

Quote from: Monoriu on March 09, 2012, 05:34:37 AM

Quote from: Tamas on March 09, 2012, 05:13:17 AM

Do not underestimate the pressure of society in determining what is good for you.

The real problem is that what is good for the individual and what is good for society are different.  As a society we need more babies.  As an individual I refuse to have any  :P

Yes, but you are getting a lot of social pressure because of that. Most people brake under it. Some brake too late.

The ones who don't, they are lucky. :P

I am sure that most parents would disagree with you and tell you that having kids was one of the best decision in their lifes.

Of course. :) I was just giving a nod to the anti-breaders of Languish, I am not one of them. :P

"Anti-breaders"? :huh:

I didn't know we had any celiacs on Languish.

As Larchie says. Unlike older generations few of us have a nice, dependable income. For example, I make about half what either of my parents do, in a job that requires much higher qualification.

The article also leaves out a couple big points: this and the bubble usually mean parents' financial support is critical for our generation. Most people I know needed help from their old folks to get a home, or lived well into their 30s with them.

That introduces another variable: if you just make older people easy to fire now that there's no chance of job creation, you kill the only thing that keeps many households above water. We need 1 to 2% growth before such a deep reform can happen. Things are quiet now because families can help. Cut that, and the only thing keeping riots away is the black market.

Quote from: Richard Hakluyt on March 09, 2012, 03:11:32 AM
The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

Quote from: Berkut on March 09, 2012, 09:49:38 AM
Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

Traditionally people relied on their kids (or extended family or friends for the childless) to take care of them in their old age.  We might be the last generation for awhile that might not have to do that.  I am already making plans to take in my mother-in-law eventually.

Quote from: Berkut on March 09, 2012, 09:49:38 AM

Quote from: Richard Hakluyt on March 09, 2012, 03:11:32 AM
The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

game, set, match.

Quote from: Tamas on March 09, 2012, 09:56:44 AM

Quote from: Berkut on March 09, 2012, 09:49:38 AM

Quote from: Richard Hakluyt on March 09, 2012, 03:11:32 AM
The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

game, set, match.

Not really.

Quote from: Berkut on March 09, 2012, 09:49:38 AM

Quote from: Richard Hakluyt on March 09, 2012, 03:11:32 AM
The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

I disagree - I think the reasons RH quoted - i.e. aging population and increasing life expectancy - are precisely behind the crisis of the current model of the national pension system (I am avoiding using the expression "welfare state" as it is politically charged and usually those who use it cannot really say what it means exactly).

Quote from: Barrister on March 09, 2012, 10:10:53 AM

Quote from: Tamas on March 09, 2012, 09:56:44 AM

Quote from: Berkut on March 09, 2012, 09:49:38 AM

Quote from: Richard Hakluyt on March 09, 2012, 03:11:32 AM
The root of the problem is that many welfare states were set up during a demographically benign period. Ageing populations and increased life expectancy are making the more generous systems unsustainable.

I think more fundamentally than that is that the payment model for the oh so wonderful welfare state is broken.

The reality is that current incomes pay for current pensions (the young pay for the old) but in general pension payment are defined separately from the income that funds them, so you end up with situations where the current income cannot support current payments.

But the old people (or middle aged looking to retire) want security, so they aren't willing to vote for a welfare state system that does not include guarantees of their income, even though such guarantees are not really possible to make for the most part.

Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

game, set, match.

Not really.

Tamas, like many Eastern Europeans, come from a perspective of the state being viewed as either a failed or an oppressive project. The result is a sort of primitive form of libertarianism - when the (Eastern European) state is trying to do something (such as take a portion of people's income and set up a pension system), the popular perception is that it is either going to squander that money or steal it.

In a sort of "self-fulfilling prophecy" way this moral malaise causes such systems to fail in the Eastern Europe - because these "primitive libertarians" try to cheat or game it, because they see no benefit in participating on honest terms.

Quote from: Tamas on March 09, 2012, 05:20:51 AM
No. It will take care of itself. Social engineering is bollocks.

I'd rather deal with social engineering than social pressure. Social engineering may be controlled by bureaucrats, but social pressure is controlled by zombies.

Ok that's rich. To attribute the failed eastern euro states to rampant quasi-libertarianism among the populace.

Dude  :lmfao:

Quote from: Valmy on March 09, 2012, 09:55:57 AM

Quote from: Berkut on March 09, 2012, 09:49:38 AM
Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

I am already making plans to take in my mother-in-law eventually.

Pillow? :P



Back on the topic of pensions, the problem with the state completely getting out of the business is that the financial institutions have proven themselves less than reliable on that front.

Quote from: Iormlund on March 09, 2012, 10:25:38 AM
Pillow? :P

No I plan on using her for childcare :shifty:

The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

Again, necessity will have us go back to the family being a more "real" financial unit. Or something.

Quote from: Malthus on March 09, 2012, 10:38:31 AM
The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

Maybe we could simply execute the elderly after they reach the age of, say, 21 or 30?

Quote from: Tamas on March 09, 2012, 10:41:09 AM
Again, necessity will have us go back to the family being a more "real" financial unit. Or something.

Well to be fair that is why it ever was in the first place :P

Sustainability depends on how generous the benefits are and the demographics of the state concerned. The burden of state pensions in the UK is not expected to rise in the next 40 years. But then we have relatively favourable demographics and a relatively mean state pension.

http://www.pensionspolicyinstitute.org.uk/uploadeddocuments/BNs/PPI_Briefing_Note_3.pdf

Quote from: Malthus on March 09, 2012, 10:38:31 AM
The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

If that is the problem, is mandatory individual savings accounts the solution?

Quote from: Monoriu on March 09, 2012, 11:27:54 AM
If that is the problem, is mandatory individual savings accounts the solution?

Well that is what Social Security pretends to be.  Not sure how that would work in practice.

Unfortunately though savings accounts return about 0.0005% interest in these days of tiny interest rates.

Quote from: Valmy on March 09, 2012, 10:44:45 AM

Quote from: Tamas on March 09, 2012, 10:41:09 AM
Again, necessity will have us go back to the family being a more "real" financial unit. Or something.

Well to be fair that is why it ever was in the first place :P

yes :P

Isn't over-saving part of the reason for the worldwide imbalances? There is a glut of capital looking for the few safe investments left.

Quote from: Richard Hakluyt on March 09, 2012, 10:59:40 AM
Sustainability depends on how generous the benefits are and the demographics of the state concerned. The burden of state pensions in the UK is not expected to rise in the next 40 years. But then we have relatively favourable demographics and a relatively mean state pension.

http://www.pensionspolicyinstitute.org.uk/uploadeddocuments/BNs/PPI_Briefing_Note_3.pdf

See, the problem is that those kinds of projections are just that - projections. You can project demographics pretty accurately of course, but you cannot project the states ability to pay for some groups retirement accuratly, because you have no idea what the specifics of the economic situation will be at some point in 40 years.

And honestly, 40 years is just one generation - but the laws passed and setting up a viable welfare state must be done to last for longer than that, if you want something that is actually sustainable. Which is my point - the rules that define what the people retired NOW are getting are almost always something that was passed in the previous generation, and hence have no bearing on the current situation as far as ability to actuallly afford them.

There is one caveat to that - if things are really great right now, there is a pretty good chance that the currently retired/soon to retire will vote to increase their benefits under the assumption that the current financial reality is somehow permanent.

When things are bad, nobody will vote to decrease benefits however, because how can you be sucha  monster forcing grandma to eat cat food?

So this cannot work in the long run. There is a ratchet effect here, where benefits can only ever stay the same or go up, but never go down. While the ability to pay varies considerably.

Quote from: Valmy on March 09, 2012, 11:29:19 AM

Quote from: Monoriu on March 09, 2012, 11:27:54 AM
If that is the problem, is mandatory individual savings accounts the solution?

Well that is what Social Security pretends to be.  Not sure how that would work in practice.

Unfortunately though savings accounts return about 0.0005% interest in these days of tiny interest rates.

We have mandatory individual savings accounts in HK.  You are legally required to put x% of your monthly salary in it.  It is yours; nobody touches it.  But you can only take money from it under certain conditions: when you reach a certain age, if you have cancer, if you buy a flat for the first time etc.  You can buy stocks or bonds with the money. 

Pensions here are going down in real terms for years now and are predicted to do so for the next three decades at least, so it's not impossible. We even had cuts in nominal terms as our pensions are directly linked to nominal wage developments.

Quote from: Monoriu on March 09, 2012, 11:45:35 AMWe have mandatory individual savings accounts in HK.  You are legally required to put x% of your monthly salary in it.  It is yours; nobody touches it.  But you can only take money from it under certain conditions: when you reach a certain age, if you have cancer, if you buy a flat for the first time etc.  You can buy stocks or bonds with the money.

What happens with that money if you die of cardiac arrest on your job farewell party aged 65?
What if you want to celebrate your 100th birthday but the money has sadly run out last month?

Quote from: Monoriu on March 09, 2012, 11:27:54 AM

Quote from: Malthus on March 09, 2012, 10:38:31 AM
The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

If that is the problem, is mandatory individual savings accounts the solution?

Sure, that's one way to do it. In Canada they incentivise voluntary individual savings through the RRSP mechanism - the incentive is tax deferral - or TFSAs - where money inside the TFSA is not taxed.

Quote from: Zanza on March 09, 2012, 11:50:56 AM

Quote from: Monoriu on March 09, 2012, 11:45:35 AMWe have mandatory individual savings accounts in HK.  You are legally required to put x% of your monthly salary in it.  It is yours; nobody touches it.  But you can only take money from it under certain conditions: when you reach a certain age, if you have cancer, if you buy a flat for the first time etc.  You can buy stocks or bonds with the money.

What happens with that money if you die of cardiac arrest on your job farewell party aged 65?

Same as your other money: your heir gets it. 

Quote from: Zanza on March 09, 2012, 11:50:56 AM

What if you want to celebrate your 100th birthday but the money has sadly run out last month?

Your problem.

Quote from: Malthus on March 09, 2012, 11:51:23 AM


Sure, that's one way to do it. In Canada they incentivise voluntary individual savings through the RRSP mechanism - the incentive is tax deferral - or TFSAs - where money inside the TFSA is not taxed.

We can't do the tax incentive thing here, because so few people pay any income tax at all.  Have to mandate it by law. 

Quote from: Monoriu on March 09, 2012, 11:52:56 AM
Your problem.

Yeah but that creates political problems and demands for the state to step in.  That was why I was leery of implementing a savings scheme for pensions in the US.  Ultimately it is politically impossible for us to let the seniors rot.  But I guess if that only applied to people 100+ years old it might work.

Quote from: Monoriu on March 09, 2012, 11:27:54 AM

Quote from: Malthus on March 09, 2012, 10:38:31 AM
The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

If that is the problem, is mandatory individual savings accounts the solution?

It is a solution, but a pretty terrible one, as it would not take advantage of the pooling of death risks.

Quote from: DGuller on March 09, 2012, 11:57:45 AM

Quote from: Monoriu on March 09, 2012, 11:27:54 AM

Quote from: Malthus on March 09, 2012, 10:38:31 AM
The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

If that is the problem, is mandatory individual savings accounts the solution?

It is a solution, but a pretty terrible one, as it would not take advantage of the pooling of death risks.

Please expand on this ...

Quote from: Monoriu on March 09, 2012, 11:54:25 AM

Quote from: Malthus on March 09, 2012, 11:51:23 AM


Sure, that's one way to do it. In Canada they incentivise voluntary individual savings through the RRSP mechanism - the incentive is tax deferral - or TFSAs - where money inside the TFSA is not taxed.

We can't do the tax incentive thing here, because so few people pay any income tax at all.  Have to mandate it by law.

Even with the tax incentive thing, which is frankly pretty sweet, it isn't enough to get people here to save enough. 

"Oh yeah, tax deferral, savings for retirement ... oooh look, shiny new cellphone that doubles as a sex toy! TV the size of our living room wall! Woo hoo!"

Quote from: Malthus on March 09, 2012, 12:02:04 PMPlease expand on this ...

You can predict with reasonable certainity how old a population will get, thanks to statistics.
An individuals lifespan on the other hand is fairly random.

I think I had about half a dozen rounds with Mono on this one, so I didn't bother repeating this one more time.

The problem with funding retirement from individual savings is that it forces you to be overly conservative.  On average, people have a predictable lifespan, but individually it's going to vary a lot.  If everyone covers their retirement on their own and wants to ensure that they don't run out of funds, then everyone has to assume that their lifespan will be far above average.  Obviously on average the lifespan can't be above average, so a lot of retirement savings would be left unspent.  That's very inefficient.

Quote from: Zanza on March 09, 2012, 12:06:15 PM

Quote from: Malthus on March 09, 2012, 12:02:04 PMPlease expand on this ...

You can predict with reasonable certainity how old a population will get, thanks to statistics.
An individuals lifespan on the other hand is fairly random.

So the issue is that person X and person Y both attempt to save a "reasonable" amount for the "average" lifespan of 80, but person X keels over when the nude chick pops out of the cake at his retirement party leaving a windfall to his useless children, while person Y lives to be 102 (while the cash runs out when he's 80, so he spends the last 22 years eating cat food while living under an overpass)? 

Quote from: Zanza on March 09, 2012, 11:49:49 AM
Pensions here are going down in real terms for years now and are predicted to do so for the next three decades at least, so it's not impossible. We even had cuts in nominal terms as our pensions are directly linked to nominal wage developments.

Pensions here are tied to inflation, wage increases or a nominal increase whichever is greater.  But the idea that we can't reform pensions systems and they'll only ever get more generous and expensive doesn't seem true.  More or less every developed country has had substantial pension reform in the past 20-25 years and most countries are going through another bout.  I think the Dutch are currently moving to a system where pension age is tied to life expectancy (as pension amount is tied to inflation) so it increases with the latest statistics.

One problem with that, though, is that life expectancy is very variable based on class and occupation.  The life expectancy of a blue collar worker is still a lot lower and so they'll be working longer so the middle class can enjoy more retirement.  The French  system is split into pensions for the management class and for the workers with varying brackets of payment, different retirement ages and pensionable income which is an interesting idea but I'm not sure how well it works. 

These systems are reformed and they are workable.  If that's not happening in your country I'd suggest there's something wrong with the political process that stops that not the principle of a welfare system.  As you point out the most comprehensive ones exist in countries that are fiscal saints and doing quite well economically.

QuoteSustainability depends on how generous the benefits are and the demographics of the state concerned. The burden of state pensions in the UK is not expected to rise in the next 40 years. But then we have relatively favourable demographics and a relatively mean state pension.

Exactly and I think it's likely that we'll have reforms throughout the next 40 years to keep it at a relative constant.  From what I've read the real fiscal problem with an ageing population is the increase in healthcare costs.

Quote from: Martinus on March 09, 2012, 10:11:36 AMI disagree - I think the reasons RH quoted - i.e. aging population and increasing life expectancy - are precisely behind the crisis of the current model of the national pension system (I am avoiding using the expression "welfare state" as it is politically charged and usually those who use it cannot really say what it means exactly).

I didn't think welfare state was politically charged.  I use it just to include the general welfare system beyond pensions.

"Welfare state" means that I work so that unemployed people can go to Thailand on holiday.

Quote from: Berkut on March 09, 2012, 11:39:39 AM

Quote from: Richard Hakluyt on March 09, 2012, 10:59:40 AM
Sustainability depends on how generous the benefits are and the demographics of the state concerned. The burden of state pensions in the UK is not expected to rise in the next 40 years. But then we have relatively favourable demographics and a relatively mean state pension.

http://www.pensionspolicyinstitute.org.uk/uploadeddocuments/BNs/PPI_Briefing_Note_3.pdf

See, the problem is that those kinds of projections are just that - projections. You can project demographics pretty accurately of course, but you cannot project the states ability to pay for some groups retirement accuratly, because you have no idea what the specifics of the economic situation will be at some point in 40 years.

And honestly, 40 years is just one generation - but the laws passed and setting up a viable welfare state must be done to last for longer than that, if you want something that is actually sustainable. Which is my point - the rules that define what the people retired NOW are getting are almost always something that was passed in the previous generation, and hence have no bearing on the current situation as far as ability to actuallly afford them.

There is one caveat to that - if things are really great right now, there is a pretty good chance that the currently retired/soon to retire will vote to increase their benefits under the assumption that the current financial reality is somehow permanent.

When things are bad, nobody will vote to decrease benefits however, because how can you be sucha  monster forcing grandma to eat cat food?

So this cannot work in the long run. There is a ratchet effect here, where benefits can only ever stay the same or go up, but never go down. While the ability to pay varies considerably.

"In the long run we are all dead"  :bowler:

I think we are coming at this from different angles berkut. A state without old age pensions can be imagined but is not really relevant to the position we are actually in. Here in Britain the nasty Tories are taking the pragmatic view and adopting measures that will reduce the long-term cost of old age pensions. I think they are right to do so as the alternative is very grim indeed.

Quote from: Richard Hakluyt on March 09, 2012, 12:24:46 PM
Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

Quote from: Valmy on March 09, 2012, 12:29:39 PM

Quote from: Richard Hakluyt on March 09, 2012, 12:24:46 PM
Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

Nonsense Valmy, their cuts are 7% greater than what Labour was planning, that makes them the spawn of Satan  :ultra:



Er..............yes, they are a lame social-democratic party remarkably similar to Labour.............except when led by Mrs Thatcher of course.

Quote from: Valmy on March 09, 2012, 12:29:39 PM

Quote from: Richard Hakluyt on March 09, 2012, 12:24:46 PM
Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

They're generally backing gay marriage too.

The sad thing is they can't even be nasty competently any more :(

In fairness on state pension in general there's a lot of consensus on the subject in this country.  The parties all tend to agree to kick it over to an independent commission every few years and then agree with all of the essentials and fight over MINOR DETAILS.  The only difference in pension policy I can think of off the top of my head is that the parties disagree over how quickly the rise in pension age should be phased in.

Quote from: Richard Hakluyt on March 09, 2012, 12:33:47 PM
Nonsense Valmy, their cuts are 7% greater than what Labour was planning, that makes them the spawn of Satan  :ultra:

I think it's even less than that by now.  Given the deterioration in the economy over the last year I think Osborne's plan is now basically the same as Darling's.

Quote from: Sheilbh on March 09, 2012, 12:34:33 PM

Quote from: Valmy on March 09, 2012, 12:29:39 PM

Quote from: Richard Hakluyt on March 09, 2012, 12:24:46 PM
Here in Britain the nasty Tories are taking the pragmatic view

The Tories are the lamest and least threatening party of evil in the world.

They're generally backing gay marriage too.

The sad thing is they can't even be nasty competently any more :(

In fairness on state pension in general there's a lot of consensus on the subject in this country.  The parties all tend to agree to kick it over to an independent commission every few years and then agree with all of the essentials and fight over MINOR DETAILS.  The only difference in pension policy I can think of off the top of my head is that the parties disagree over how quickly the rise in pension age should be phased in.

The dearth of talent in the Commons is indeed far more worrying than the minute difference between your standard "nasty tory" and "champagne socialist".

The level of competence........surely it is at a new nadir? Or perhaps I'm just old and cynical.

Quote from: Richard Hakluyt on March 09, 2012, 12:40:17 PMThe dearth of talent in the Commons is indeed far more worrying than the minute difference between your standard "nasty tory" and "champagne socialist".

The level of competence........surely it is at a new nadir? Or perhaps I'm just old and cynical.

I disagree.

I think the Commons is the most assertive and is closer to doing it's job than any I can remember.  A lot of the credit should go to John Bercow who has got rid of the rules requiring new MPs to make a maiden speech before they can ask questions and who grants so many emergency questions and debates.  Also the elections of Select Committee Chairs have been a good step I think.  At the same time apparently this Commons has more MPs with lots of non-political experience than in the past few years.  It's also the most rebellious ever - in all parties, I think.  The sad thing is a lot of those people, who are being great MPs, want to stay as great MPs.  They want to stay as backbenchers and I don't think they can deal with the bullshit that goes into becoming a minister.

The real shallow pool is the leadership and the people who want to be leaders.  I don't even know that it's because they're all career politicians.  I wonder if part of it's just that they're all very young.  All the party leaders and much of the cabinet have been in Parliament for about 5 years, they're all in their late 30s-early 40s.  The best party leader in the UK right now is Alex Salmond who's been rolling round nationalist politics for the best part 30 years (though, in fairness he became leader very young) and that experience does seem to show.

Quote from: Malthus on March 09, 2012, 12:05:23 PM


"Oh yeah, tax deferral, savings for retirement ... oooh look, shiny new cellphone that doubles as a sex toy! TV the size of our living room wall! Woo hoo!"

yeah. the problem is, our current economic model would be in serious jeopardy if they stopped doing so, however. On the short term anyway. And we rather QE ourselves to death than to see that happen!

Quote from: Tamas on March 09, 2012, 12:54:32 PM
yeah. the problem is, our current economic model would be in serious jeopardy if they stopped doing so, however. On the short term anyway. And we rather QE ourselves to death than to see that happen!

I was going to post something like this: that if people actualy did start saving and doing what is in their best interests and quit blowing their money on garbage they do not need our entire economy would be in real danger

@Shielbh - yes I can agree with you there, the dearth of talent is on the front benches rather than the Commons - I mispoke  ;)

I've been surprised by Bercow. He is easy to ridicule given that silly wife of his but I have been coming round and now think he is doing a pretty good job.

Interesting what you say about the leaders being so young, I ranted on about that in a self-parodying way to my wife a few days ago, but I do wonder about it..............they seem surprised when things go wrong or backfire  :hmm:

Quote from: DGuller on March 09, 2012, 12:11:07 PM
I think I had about half a dozen rounds with Mono on this one, so I didn't bother repeating this one more time.

The problem with funding retirement from individual savings is that it forces you to be overly conservative.  On average, people have a predictable lifespan, but individually it's going to vary a lot.  If everyone covers their retirement on their own and wants to ensure that they don't run out of funds, then everyone has to assume that their lifespan will be far above average.  Obviously on average the lifespan can't be above average, so a lot of retirement savings would be left unspent.  That's very inefficient.

We've been over this a hundred times dude.  An individual can hedge the life expectancy risk by purchasing an annuity.

Quote from: Admiral Yi on March 09, 2012, 01:03:17 PMWe've been over this a hundred times dude.  An individual can hedge the life expectancy risk by purchasing an annuity.

Is it really controversial that collective hedging is more efficient than individual hedging?

Quote from: Jacob on March 09, 2012, 01:06:46 PM
Is it really controversial that collective hedging is more efficient than individual hedging?

If you look solely at long life risk collective might be more efficient because you don't have adverse selection, but if you add in the other distortions of public pensions I doubt it.

The downside of everybody buying an annuity is that there aren't enough worthwhile investments that also fit the risk profile that's required for an annuity. You end up with indirectly buying low-yield government debt that will be used to create the demand that you did not create by saving so much. So it works as long as just some individuals do it, but I am sceptical it works for society at large.

Quote from: Malthus on March 09, 2012, 10:38:31 AM
The problem with having everyone provide for their own retirement security is that very few have the financial discipline to actually do it. While the system would be perfectly fair, in a sort of 'ant vs. grasshopper' sense, people are unlikely to tolerate the sight of old folks being reduced to beggary, no matter how much they deserve it for spending all of their moolah on big-screen TVs while they were working.

This is true. Speaking to the US situation that I believe is generally true internationally, the idea of social security to provide a minimum of retirement security has eroded: currently individual benefits can go up to $30k a year. Most get a lot less, but the point stands: $30k a year is not a minimum amout to get by--in parts of the country it probably approaches the average annual income. Adjusting for inflation, when social security started the maximum benefit was a fraction of that amount.

We tend to be of a mindset to reduce benefit payments by increasing the retirement age, which seems crazy to me. If social security is designed to protect people from destitution in old age, the most at risk are probably going to be working class people, and a lot of people aren't going to be so able to perform manual labor after age 67. I, on the other hand, may be able to shuffle paper for years after that, but I'm not really the at risk group.

In addition to DGuller's point about social security being a great way to pool death benefits, there are two other problems with tax advantaged savings vehicles:

1) The general public aren't trained investment professionals. There is a lot of evidence that the general public performs miserably at investing their own money and their gains tend to get chewed up in fees. Also, some will inevitably lose their savings completely, which brings us back to Malthus's concern of destitute old people.
2) The data shows that the people who take advantage of the tax advantaged private vehicles don't need them. I max out every tax advantaged account I can--and have for years--which has been a tremendous help in reducing my tax burden, but isn't really helping anyone avoid old age destitution. On the other hand, most poor people don't have 401ks or IRAs, and very few have them with enough assets to give them a secure retirement. I understand Mitt Romney's financial disclosures showed that he managed to get an IRA with about $30 million in it, which is money that has avoided US taxes to date and potentially could for another couple generations if the family plays the inheritance planning game right.

Quote from: Valmy on March 09, 2012, 12:56:57 PM

Quote from: Tamas on March 09, 2012, 12:54:32 PM
yeah. the problem is, our current economic model would be in serious jeopardy if they stopped doing so, however. On the short term anyway. And we rather QE ourselves to death than to see that happen!

I was going to post something like this: that if people actualy did start saving and doing what is in their best interests and quit blowing their money on garbage they do not need our entire economy would be in real danger

yes, but I would like to believe, well, I need to believe, that an economy with a groundwork of savings, and not make-believe money, is possible.
It's just that we are way too far ahead into the current model to get rid of it without some major upheveal. And then that trouble may be an other big war, which will reset the whole thing, letting us start again for an other 50 years. The survivors, at least.

Quote from: Berkut on March 09, 2012, 09:49:38 AM
Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

How could it not be?  The state exists to keep social order, and the only alternative to their providing of this security is blood in the streets.

Quote from: Admiral Yi on March 09, 2012, 01:12:51 PM

Quote from: Jacob on March 09, 2012, 01:06:46 PM
Is it really controversial that collective hedging is more efficient than individual hedging?

If you look solely at long life risk collective might be more efficient because you don't have adverse selection, but if you add in the other distortions of public pensions I doubt it.

I doubt that. What sort of distortions do you mean?

Seems to me that social security of any kind - be it unemployment insurance, health care and old age security - is best handled by the state. If the objective is to provide a universal minimum service - the objective is to give someone who loses their job some support until they find another job (unemployment insurance), to not let people die from or suffer from at least some treatable illnesses and accidents (health care), and to not be absolutely destitute when they're too old to earn their own living (social security) - and we want to provide that no matter how many bad financial decisions they made prior to needing any of these social services and this makes free market solutions inapplicable. Now, you may disagree that we as a society should provide such security - health, employment and old age (or worker's compensation or whatever) - but that's a different argument than the argument about the most efficient way to provide it.

The point of social security is that you can't opt out of it - you're guaranteed something of a safety net. Another point is that you can't mess it up - if you lack the proper financial planning skills or resources, if you have bad luck, or you otherwise don't do the right things - you're still covered; you don't need to starve to death under a bridge somewhere or take to a life of crime. How can a individual hedging provide that, unless it's underwritten by the collective (making it no actually individual at all)?

Quote from: Neil on March 09, 2012, 02:06:40 PM

Quote from: Berkut on March 09, 2012, 09:49:38 AM
Of course, one could take it a level further and say the more fundamental problem is that basic idea that the state should provide this retirement security to begin with.

How could it not be?  The state exists to keep social order, and the only alternative to their providing of this security is blood in the streets.

Yeah, I think it's more honest frame it like Berkut does.

Maybe you don't believe that the state should provide social security of particular forms (be it health, employment, retirement, whatever). If so, then let's have that discussion.

Personally, I think that providing social security of various sorts is one of the fundamental reasons for the existence of the state to begin with. I also think it's a better vehicle for providing the various forms of social security than the individual or privatized alternative, which is a somewhat different discussion.

Maybe the biggest issue is like ARs point--that when it goes from being a safety net to a full-on pension it gets too big for itself. The same things that make a safety net universal and secure also make it a poorly performing investment. If it sucks up too much of society's assets it can slow economic growth.

Quote from: alfred russel on March 09, 2012, 01:32:27 PM
In addition to DGuller's point about social security being a great way to pool death benefits, there are two other problems with tax advantaged savings vehicles:

1) The general public aren't trained investment professionals. There is a lot of evidence that the general public performs miserably at investing their own money and their gains tend to get chewed up in fees. Also, some will inevitably lose their savings completely, which brings us back to Malthus's concern of destitute old people.
2) The data shows that the people who take advantage of the tax advantaged private vehicles don't need them. I max out every tax advantaged account I can--and have for years--which has been a tremendous help in reducing my tax burden, but isn't really helping anyone avoid old age destitution. On the other hand, most poor people don't have 401ks or IRAs, and very few have them with enough assets to give them a secure retirement. I understand Mitt Romney's financial disclosures showed that he managed to get an IRA with about $30 million in it, which is money that has avoided US taxes to date and potentially could for another couple generations if the family plays the inheritance planning game right.

Yep, if such a tax advantageous system was introduced I would do well.  But in the end I would end up paying more in tax to bail out those who didnt in any event.

Btw does anyone know where the idea of moving away from state pensions originated?

Quote from: crazy canuck on March 09, 2012, 02:30:23 PM

Quote from: alfred russel on March 09, 2012, 01:32:27 PM
In addition to DGuller's point about social security being a great way to pool death benefits, there are two other problems with tax advantaged savings vehicles:

1) The general public aren't trained investment professionals. There is a lot of evidence that the general public performs miserably at investing their own money and their gains tend to get chewed up in fees. Also, some will inevitably lose their savings completely, which brings us back to Malthus's concern of destitute old people.
2) The data shows that the people who take advantage of the tax advantaged private vehicles don't need them. I max out every tax advantaged account I can--and have for years--which has been a tremendous help in reducing my tax burden, but isn't really helping anyone avoid old age destitution. On the other hand, most poor people don't have 401ks or IRAs, and very few have them with enough assets to give them a secure retirement. I understand Mitt Romney's financial disclosures showed that he managed to get an IRA with about $30 million in it, which is money that has avoided US taxes to date and potentially could for another couple generations if the family plays the inheritance planning game right.

Yep, if such a tax advantageous system was introduced I would do well.  But in the end I would end up paying more in tax to bail out those who didnt in any event.

Btw does anyone know where the idea of moving away from state pensions originated?

Wall Street

Quote from: crazy canuck on March 09, 2012, 02:30:23 PM

Yep, if such a tax advantageous system was introduced I would do well.  But in the end I would end up paying more in tax to bail out those who didnt in any event.

What if the contributions were mandatory?

Quote

Btw does anyone know where the idea of moving away from state pensions originated?

Is anyone moving away?

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PM
Is anyone moving away?

Did you take a Grumbler pill this morning? :hmm:

Quote from: crazy canuck on March 09, 2012, 02:41:36 PM

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PM
Is anyone moving away?

Did you take a Grumbler pill this morning? :hmm:

No.  :lol:

I mean nobody is seriously abandoning their state-run pensions.

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PMIs anyone moving away?

The existence of RRSPs (in Canada) and 401Ks or WD40s or IRAs (or is that UDFs?) or whatever the tax deductible retirement plans are called in the US shows that a move has already happened.

Quote from: Jacob on March 09, 2012, 02:44:26 PM

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PMIs anyone moving away?

The existence of RRSPs (in Canada) and 401Ks or WD40s or IRAs (or is that UDFs?) or whatever the tax deductible retirement plans are called in the US shows that a move has already happened.

Those were added in addition to SSA. They didn't replace it.

Quote from: MadImmortalMan on March 09, 2012, 02:46:05 PM

Quote from: Jacob on March 09, 2012, 02:44:26 PM

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PMIs anyone moving away?

The existence of RRSPs (in Canada) and 401Ks or WD40s or IRAs (or is that UDFs?) or whatever the tax deductible retirement plans are called in the US shows that a move has already happened.

Those were added in addition to SSA. They didn't replace it.

But now people are arguing that they are sufficient and we should get rid of SSA. Hence "move away."

Quote from: MadImmortalMan on March 09, 2012, 02:42:51 PM
I mean nobody is seriously abandoning their state-run pensions.

My concern is that people may not have that option the way some politicians are talking.  If old age intitlements are reduced sufficiently people who dont have the means for the knowledge to do so may be forced into becoming investors.

Quote from: Jacob on March 09, 2012, 02:44:26 PM

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PMIs anyone moving away?

The existence of RRSPs (in Canada) and 401Ks or WD40s or IRAs (or is that UDFs?) or whatever the tax deductible retirement plans are called in the US shows that a move has already happened.

Given that those were adopted as an alternative to employer-paid pensions, I don't think that quite holds up.  The public pension was always a minimum standard, and the RRSP and 401k was just a matter of transfering the remainder of retirement income from the relatively reliable employer to the certain doom that is the market.

Quote from: crazy canuck on March 09, 2012, 02:30:23 PM
Btw does anyone know where the idea of moving away from state pensions originated?

Chile.  Copied in a few Latin American countries.  Furiously yearned for by libertarians in the US.

Ironically pension reform was a big issue in Chile's last election because the system's only now moving from a theory to practice, people have been contributing for 20-30 years.  Unfortunately it's not really worked so both right and left-wing candidates were running on the need for substantial reform that are moving towards a state pension.

I believe all the other Latin American countries who tried Chilean style reforms have also moved back from them.  Argentina with did so with her unique sense of drama and flair :lol:

Quote from: Neil on March 09, 2012, 02:50:42 PM

Quote from: Jacob on March 09, 2012, 02:44:26 PM

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PMIs anyone moving away?

The existence of RRSPs (in Canada) and 401Ks or WD40s or IRAs (or is that UDFs?) or whatever the tax deductible retirement plans are called in the US shows that a move has already happened.

Given that those were adopted as an alternative to employer-paid pensions, I don't think that quite holds up.  The public pension was always a minimum standard, and the RRSP and 401k was just a matter of transfering the remainder of retirement income from the relatively reliable employer to the certain doom that is the market.

Please tell that to Prince Cuomo. He and his advisors feel that a 401K is a perfectly acceptable alternative leading to replacement for a public pension.

Quote from: Strix on March 09, 2012, 03:04:17 PM
Please tell that to Prince Cuomo. He and his advisors feel that a 401K is a perfectly acceptable alternative leading to replacement for a public pension.

We're talking about social benefits here, not your employee pension. In your case, he's probably right.

Quote from: Strix on March 09, 2012, 03:04:17 PM

Quote from: Neil on March 09, 2012, 02:50:42 PM

Quote from: Jacob on March 09, 2012, 02:44:26 PM

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PMIs anyone moving away?

The existence of RRSPs (in Canada) and 401Ks or WD40s or IRAs (or is that UDFs?) or whatever the tax deductible retirement plans are called in the US shows that a move has already happened.

Given that those were adopted as an alternative to employer-paid pensions, I don't think that quite holds up.  The public pension was always a minimum standard, and the RRSP and 401k was just a matter of transfering the remainder of retirement income from the relatively reliable employer to the certain doom that is the market.

Please tell that to Prince Cuomo. He and his advisors feel that a 401K is a perfectly acceptable alternative leading to replacement for a public pension.

Well, at least that would put public employees and private ones in the same boat.

Quote from: MadImmortalMan on March 09, 2012, 03:10:35 PM

Quote from: Strix on March 09, 2012, 03:04:17 PM
Please tell that to Prince Cuomo. He and his advisors feel that a 401K is a perfectly acceptable alternative leading to replacement for a public pension.

We're talking about social benefits here, not your employee pension. In your case, he's probably right.

In that case, 401K would probably be the best way to go, at least in the US. Politicians are unable to leave Social Security funds alone. Taking their ability to "borrow" from the public pension fund will make for a brighter financial future for those involved.

Quote from: Neil on March 09, 2012, 02:50:42 PM
Given that those were adopted as an alternative to employer-paid pensions, I don't think that quite holds up.  The public pension was always a minimum standard, and the RRSP and 401k was just a matter of transfering the remainder of retirement income from the relatively reliable employer to the certain doom that is the market.

Where do you think those pension funds invest their money? :mellow:

Quote from: Neil on March 09, 2012, 03:19:52 PM

Quote from: Strix on March 09, 2012, 03:04:17 PM

Quote from: Neil on March 09, 2012, 02:50:42 PM

Quote from: Jacob on March 09, 2012, 02:44:26 PM

Quote from: MadImmortalMan on March 09, 2012, 02:40:53 PMIs anyone moving away?

The existence of RRSPs (in Canada) and 401Ks or WD40s or IRAs (or is that UDFs?) or whatever the tax deductible retirement plans are called in the US shows that a move has already happened.

Given that those were adopted as an alternative to employer-paid pensions, I don't think that quite holds up.  The public pension was always a minimum standard, and the RRSP and 401k was just a matter of transfering the remainder of retirement income from the relatively reliable employer to the certain doom that is the market.

Please tell that to Prince Cuomo. He and his advisors feel that a 401K is a perfectly acceptable alternative leading to replacement for a public pension.

Well, at least that would put public employees and private ones in the same boat.

But I prefer Berkut in his little dinghy screaming at me from a distance about my benefits.

Quote from: Admiral Yi on March 09, 2012, 03:23:51 PM

Quote from: Neil on March 09, 2012, 02:50:42 PM
Given that those were adopted as an alternative to employer-paid pensions, I don't think that quite holds up.  The public pension was always a minimum standard, and the RRSP and 401k was just a matter of transfering the remainder of retirement income from the relatively reliable employer to the certain doom that is the market.

Where do you think those pension funds invest their money? :mellow:

Doesn't much matter, as the employer is on the hook no matter where they invest it.

Quote from: Jacob on March 09, 2012, 02:47:44 PM
But now people are arguing that they are sufficient and we should get rid of SSA. Hence "move away."

I think they should be for different things. SSA imo is to guarantee a minimum level of income so that someone can subsist. Retirement savings vehicles are so that people can put away money for a more comfortable retirement.

I'd argue that both are bloated. SSA has payment caps that are quite high from where they started (though certainly most people aren't hitting the caps), while you can put away a lot in tax advantaged vehicles for retirement.

The two most popular are the 401k (through an employer) which has a cap of $17,000 a year (excluding an employer match) while the IRA (done by an individual) has a cap of $5,000 a year. If you assume an employer match of $3k, that means a married couple could put away $50k a year. At a certain point we've moved from giving working class people a chance to save for a comfortable retirement to helping upper class folks avoid taxes.

Quote from: Neil on March 09, 2012, 02:50:42 PM
Given that those were adopted as an alternative to employer-paid pensions, I don't think that quite holds up.  The public pension was always a minimum standard, and the RRSP and 401k was just a matter of transfering the remainder of retirement income from the relatively reliable employer to the certain doom that is the market.

Good point.

Quote from: alfred russel on March 09, 2012, 03:29:00 PMI'd argue that both are bloated. SSA has payment caps that are quite high from where they started (though certainly most people aren't hitting the caps), while you can put away a lot in tax advantaged vehicles for retirement.

The two most popular are the 401k (through an employer) which has a cap of $17,000 a year (excluding an employer match) while the IRA (done by an individual) has a cap of $5,000 a year. If you assume an employer match of $3k, that means a married couple could put away $50k a year. At a certain point we've moved from giving working class people a chance to save for a comfortable retirement to helping upper class folks avoid taxes.

You're arguing that people who are sufficiently wealthy (however you define that), should not receive the government funded SSA? I'm okay with that. My wife was looking at someone getting pension payments of $70 000/ month. I'm sure that individual can do without his or her Canada Pension payments.

Quote from: Jacob on March 09, 2012, 04:07:13 PM
You're arguing that people who are sufficiently wealthy (however you define that), should not receive the government funded SSA? I'm okay with that. My wife was looking at someone getting pension payments of $70 000/ month. I'm sure that individual can do without his or her Canada Pension payments.

No--there could be a rule that suspended payments to people who in retirement have a certain income in that year, but my understanding is that it has been looked at and it wouldn't save very much money. Plus it would start to change the program from a "social insurance" program to a welfare program, and that could undermine the political support for the whole thing.

I think the smartest way to save money is to change the cap on payments from the $30k or whatever it is to something more like $20k. Most working class people aren't going to get that anyway.

Quote from: Jacob on March 09, 2012, 04:07:13 PM

Quote from: alfred russel on March 09, 2012, 03:29:00 PMI'd argue that both are bloated. SSA has payment caps that are quite high from where they started (though certainly most people aren't hitting the caps), while you can put away a lot in tax advantaged vehicles for retirement.

The two most popular are the 401k (through an employer) which has a cap of $17,000 a year (excluding an employer match) while the IRA (done by an individual) has a cap of $5,000 a year. If you assume an employer match of $3k, that means a married couple could put away $50k a year. At a certain point we've moved from giving working class people a chance to save for a comfortable retirement to helping upper class folks avoid taxes.

You're arguing that people who are sufficiently wealthy (however you define that), should not receive the government funded SSA? I'm okay with that. My wife was looking at someone getting pension payments of $70 000/ month. I'm sure that individual can do without his or her Canada Pension payments.

I took it he was referring not to social security payments, but to the availability of tax-deferrral vehicles to the relatively wealthy in the guise of retirement savings.

Quote from: Malthus on March 09, 2012, 04:34:55 PMI took it he was referring not to social security payments, but to the availability of tax-deferrral vehicles to the relatively wealthy in the guise of retirement savings.

Ah okay. Yeah sure, then :)

Quote from: Jacob on March 09, 2012, 05:29:38 PM

Quote from: Malthus on March 09, 2012, 04:34:55 PMI took it he was referring not to social security payments, but to the availability of tax-deferrral vehicles to the relatively wealthy in the guise of retirement savings.

Ah okay. Yeah sure, then :)

In the Canadian context, I'm not sure I agree with him - the amounts at issue are simply not great enough to lead to the conclusion that it's a way of protecting anything like wealth.

In Canada at least, the RRSP cap is $22,970 for 2012, to which you can add a yearly $5,000 in TFSA (the difference is that RRSP money is money you don't pay tax on now - you pay it when you take it out; TFSA is money where on which you don't pay any capital gains).

Obviously, the RRSP is most valuable if you are in a high tax bracket, because the benefit is the difference between the tax you pay now and what you pay when you retire.

But $23K (or 28K) per year isn't really what I'd call "rich".   

Let me preface by saying that I agree with Jacob on a philosophical/ideological level - i.e. that we can't see old people starving to death in a civilized society.

That being said, I think the problem with the pension system comes from the following: there are three criteria that, imo, can be used to set up an universal (state-run) pension system: (i) that it is fair, (ii) that it provides a minimum needed to survive to everyone, and (iii) that it is financially sound - and I think that as with many of things like this, you can achieve two out of three, but not all three.

I think you can have a financially sound system that is "fair" in that you get out what you put in (the system described by Monoriu) but the downside is going to be that if you put very little or none at all, you will end up being destitute.

On the other hand you can have a financially sound system that provides simply the bare minimum to everyone/those in need, but in order for such system to work, people who earn more will need to contribute more - but still they will be eligible to only get the bare minimum - so the system is not going to be "fair".

If you try to be both fair and provide the bare minimum to people who put in nothing/very little, you are bound to run out of money.

I think the political decision, therefore, is to choose whether you want to be "fair" (and keep the illusion that you get what you put in, such as individual state pension accounts) or whether the objective is to simply keep destitute people out of starvation, while the average person is more or less expected to keep their own savings/pension scheme - and the state run one is treated more as an insurance against old age poverty.

Quote from: Malthus on March 09, 2012, 05:39:14 PM
In the Canadian context, I'm not sure I agree with him - the amounts at issue are simply not great enough to lead to the conclusion that it's a way of protecting anything like wealth.

In Canada at least, the RRSP cap is $22,970 for 2012, to which you can add a yearly $5,000 in TFSA (the difference is that RRSP money is money you don't pay tax on now - you pay it when you take it out; TFSA is money where on which you don't pay any capital gains).

Obviously, the RRSP is most valuable if you are in a high tax bracket, because the benefit is the difference between the tax you pay now and what you pay when you retire.

But $23K (or 28K) per year isn't really what I'd call "rich".

The numbers are about the same in the US context, so we probably actually disagree. The issue as I see it is that roughly $25k a year put away for a single individual adds up to a very significant balance after 30 years or so. With investment earnings, and a spouse also maxing his or her account out, it is a multi million dollar tax deferral vehicle. Of course that isn't all of the savings you have, but it will be the last you want to touch for a lot of reasons, including that you can keep some of the deferral going after your death for you heirs.

Also these are just one of several tax deferral mechanisms. For example, college savings plans, health savings accounts, and deferred comp plans. Even stock options have this kind of benefit. I've heard of people retiring, moving to Hong Kong, and attempting to use that time collect their deferred comp and exercise their options (sometimes company withholding thwarts this, and global tax authorities are getting wiser to it). This stuff won't really help Warren Buffet, but they sure do help you ordinary millionaire.

Something interesting that I mentioned earlier is that they seem to be exploited by the non ordinary millionaires as well--Mitt Romney has an IRA that is worth something like $30 million--presumably obtained by cramming illiquid and difficult to value assets into it, and claiming a low valuation to get under the caps.

Quote from: alfred russel on March 09, 2012, 09:03:51 PM

Quote from: Malthus on March 09, 2012, 05:39:14 PM
In the Canadian context, I'm not sure I agree with him - the amounts at issue are simply not great enough to lead to the conclusion that it's a way of protecting anything like wealth.

In Canada at least, the RRSP cap is $22,970 for 2012, to which you can add a yearly $5,000 in TFSA (the difference is that RRSP money is money you don't pay tax on now - you pay it when you take it out; TFSA is money where on which you don't pay any capital gains).

Obviously, the RRSP is most valuable if you are in a high tax bracket, because the benefit is the difference between the tax you pay now and what you pay when you retire.

But $23K (or 28K) per year isn't really what I'd call "rich".

The numbers are about the same in the US context, so we probably actually disagree. The issue as I see it is that roughly $25k a year put away for a single individual adds up to a very significant balance after 30 years or so. With investment earnings, and a spouse also maxing his or her account out, it is a multi million dollar tax deferral vehicle. Of course that isn't all of the savings you have, but it will be the last you want to touch for a lot of reasons, including that you can keep some of the deferral going after your death for you heirs.

Also these are just one of several tax deferral mechanisms. For example, college savings plans, health savings accounts, and deferred comp plans. Even stock options have this kind of benefit. I've heard of people retiring, moving to Hong Kong, and attempting to use that time collect their deferred comp and exercise their options (sometimes company withholding thwarts this, and global tax authorities are getting wiser to it). This stuff won't really help Warren Buffet, but they sure do help you ordinary millionaire.

Something interesting that I mentioned earlier is that they seem to be exploited by the non ordinary millionaires as well--Mitt Romney has an IRA that is worth something like $30 million--presumably obtained by cramming illiquid and difficult to value assets into it, and claiming a low valuation to get under the caps.

Consider that this money is supposed to fund a pension. While 30 years of saving 28 K is a lot of money as a lump sum, it doesn't look so large when weighed against the requirements - that this is the money you will need to live off of for the next 20-30 years.

Quote from: alfred russel on March 09, 2012, 04:29:23 PMPlus it would start to change the program from a "social insurance" program to a welfare program, and that could undermine the political support for the whole thing.

I don't see any point in worrying about that at this stage. We can't make it an insurance program. It's well beyond that transition now.

Quote from: MadImmortalMan on March 10, 2012, 08:24:20 PM
I don't see any point in worrying about that at this stage. We can't make it an insurance program. It's well beyond that transition now.

Fredo is saying that's what is now.

Quote from: Malthus on March 10, 2012, 03:19:09 PM
Consider that this money is supposed to fund a pension. While 30 years of saving 28 K is a lot of money as a lump sum, it doesn't look so large when weighed against the requirements - that this is the money you will need to live off of for the next 20-30 years.

Which is another point I left off: pension plans may be hidden from the employee but are tax advantaged as well.

The issue I have is that this is in addition to social security. A person maxing out these accounts is probably going to be close to the max for social security, so we already have a base income of nearly $30k in retirement (in the US at least). Now lets just assume that our investments on the account can only keep pace with inflation: you can now pull out about another $30k a year in retirement (roughly 30 years of contributions offsetting roughly 30 years of drawing on the money). An income of $60k is not super rich by any stretch: but it is also above average and comfortably middle class. Is that something that needs to be subsidized by the general public? We aren't talking about making sure old people aren't destitute anymore.

Quote from: Martinus on March 09, 2012, 06:51:07 PM
Let me preface by saying that I agree with Jacob on a philosophical/ideological level - i.e. that we can't see old people starving to death in a civilized society.

Really? Then you don't understand the Liberal mindset very well, do you.

Over here, in order to reduce the deficit without raising taxes on the rich (but hiking them by over 10% on the poor), the highborn Liberals who run the government brilliantly decided to shut down this year most public hospitals, in particular those in the interior, which served small communities.

THEN they hiked by 500% the price of an ambulance trip from those places to the hospitals in the litoral, AND jacked up by 100% the price of an examination by a public doctor.

As the elderly of the interior usually have pensions of USD $4k a year, they cannot afford health care anymore.

The result: the death rate among the elderly increased threefold in the first quarter of this year.

The Liberals in power are "very amazed" at this "odd" turn of events and promised an investigation by a parliamentary commission (which undoubtably will find *no* correlation between shutting down the hospitals to the poor and a massive increase of the death rate of the same right afterwards).

Quote from: Martim Silva on March 11, 2012, 09:36:34 AM

Quote from: Martinus on March 09, 2012, 06:51:07 PM
Let me preface by saying that I agree with Jacob on a philosophical/ideological level - i.e. that we can't see old people starving to death in a civilized society.

Really? Then you don't understand the Liberal mindset very well, do you.

Over here, in order to reduce the deficit without raising taxes on the rich (but hiking them by over 10% on the poor), the highborn Liberals who run the government brilliantly decided to shut down this year most public hospitals, in particular those in the interior, which served small communities.

THEN they hiked by 500% the price of an ambulance trip from those places to the hospitals in the litoral, AND jacked up by 100% the price of an examination by a public doctor.

As the elderly of the interior usually have pensions of USD $4k a year, they cannot afford health care anymore.

The result: the death rate among the elderly increased threefold in the first quarter of this year.

The Liberals in power are "very amazed" at this "odd" turn of events and promised an investigation by a parliamentary commission (which undoubtably will find *no* correlation between shutting down the hospitals to the poor and a massive increase of the death rate of the same right afterwards).

I think you suffer from the same fallacy that Tamas does - i.e. you both come from badly organized countries ruled by highly corrupt coteries. You then use their corruption as an argument against their nominal political ideologies.

I have recently viewed the Portuguese corruption first hand, by having a closer look at a major banking group in your country and its ties with the government. You guys make Poland look like transparency international poster boy.

Actually, Marty, what the left stands for economically/ideologally, and what it does, is pretty much the same, in Europe anyway, so I don't think I am committing any fallacy by disliking them, apart from disagreeing with you.

You are right about one thing: the idiotic fact that the political right here is much more left-leaning economically than the political left, would indeed keep me away from them, if their bigottry and racism weren't enough.

Quote from: Tamas on March 11, 2012, 11:42:57 AM
Actually, Marty, what the left stands for economically/ideologally, and what it does, is pretty much the same, in Europe anyway

Prominent examples being Blair and Schröder?  :P

Quote from: alfred russel on March 10, 2012, 09:10:08 PM

Quote from: Malthus on March 10, 2012, 03:19:09 PM
Consider that this money is supposed to fund a pension. While 30 years of saving 28 K is a lot of money as a lump sum, it doesn't look so large when weighed against the requirements - that this is the money you will need to live off of for the next 20-30 years.

Which is another point I left off: pension plans may be hidden from the employee but are tax advantaged as well.

The issue I have is that this is in addition to social security. A person maxing out these accounts is probably going to be close to the max for social security, so we already have a base income of nearly $30k in retirement (in the US at least). Now lets just assume that our investments on the account can only keep pace with inflation: you can now pull out about another $30k a year in retirement (roughly 30 years of contributions offsetting roughly 30 years of drawing on the money). An income of $60k is not super rich by any stretch: but it is also above average and comfortably middle class. Is that something that needs to be subsidized by the general public? We aren't talking about making sure old people aren't destitute anymore.

Well, tax-advantaged savings were never about making sure old folks aren't destitute - they were always about allowing people who perhaps did not have an employment-based pension (the majority of people these days) to live in reasonable comfort. I can't see why this is a bad thing, myself.

Quote from: Tamas on March 11, 2012, 11:42:57 AM
Actually, Marty, what the left stands for economically/ideologally, and what it does, is pretty much the same, in Europe anyway, so I don't think I am committing any fallacy by disliking them, apart from disagreeing with you.

I can tell you that no Scandinavian leftist parties act the way you describe.

Quote from: Tamas on March 11, 2012, 11:42:57 AM
Actually, Marty, what the left stands for economically/ideologally, and what it does, is pretty much the same, in Europe anyway, so I don't think I am committing any fallacy by disliking them, apart from disagreeing with you.

Heh. Our "socialists" increased sales tax, lowered max income tax rates and set up a low flat tax on capital. Up until last month they were also the only ones to have reformed the labour market.

The only difference between right and left in this country is their social agenda.

Quote from: Iormlund on March 12, 2012, 12:34:47 PM
Heh. Our "socialists" increased sales tax, lowered max income tax rates and set up a low flat tax on capital. Up until last month they were also the only ones to have reformed the labour market.

The only difference between right and left in this country is their social agenda.

A wealth tax sounds pretty socialist to me, flat rate or no.

Or did you mean capital gains?

Yes, capital gains.

Quote from: Martinus on March 11, 2012, 09:44:49 AM

I think you suffer from the same fallacy that Tamas does - i.e. you both come from badly organized countries ruled by highly corrupt coteries. You then use their corruption as an argument against their nominal political ideologies.

I have recently viewed the Portuguese corruption first hand, by having a closer look at a major banking group in your country and its ties with the government. You guys make Poland look like transparency international poster boy.

I think you have a point there.  Of course, I think the same applies to Poland when compared to say the UK or the US.

I just got around to reading this weeks economist.  There is an article regarding how the Canadian public sector pension funds (like the Ontario Teachers fund) is becoming a model others wish to emulate.

In particular the Economist compliments them on cutting costs by doing their investing in house and thus cutting out all the expensive fees of middle men managers and on paying large bonuses for long term gains (rather than the quarterly bonuses common in investment houses) which creates incentives for long term trading strategies.

The thing I found most interesting about that article is how many private equity deals the Canadian pension funds are doing. [Bain]  :ph34r:

Quote from: Admiral Yi on March 12, 2012, 02:28:43 PM
The thing I found most interesting about that article is how many private equity deals the Canadian pension funds are doing. [Bain]  :ph34r:

Yeah, I had to laugh about the poke the economist made at the private equity managers who thought they could not compete on price because the Canadians had longer time horizons and less pressure to show quarterly earnings.  All the finaincial folks who want to invest my money keep talking about investing for the future but it took me a while to find someone who actually does.

Quote from: Martim Silva on March 11, 2012, 09:36:34 AM

Quote from: Martinus on March 09, 2012, 06:51:07 PM
Let me preface by saying that I agree with Jacob on a philosophical/ideological level - i.e. that we can't see old people starving to death in a civilized society.

Really? Then you don't understand the Liberal mindset very well, do you.

Over here, in order to reduce the deficit without raising taxes on the rich (but hiking them by over 10% on the poor), the highborn Liberals who run the government brilliantly decided to shut down this year most public hospitals, in particular those in the interior, which served small communities.

THEN they hiked by 500% the price of an ambulance trip from those places to the hospitals in the litoral, AND jacked up by 100% the price of an examination by a public doctor.

As the elderly of the interior usually have pensions of USD $4k a year, they cannot afford health care anymore.

The result: the death rate among the elderly increased threefold in the first quarter of this year.

The Liberals in power are "very amazed" at this "odd" turn of events and promised an investigation by a parliamentary commission (which undoubtably will find *no* correlation between shutting down the hospitals to the poor and a massive increase of the death rate of the same right afterwards).

You're using the European definition of liberal though, not the American one.

Quote from: crazy canuck on March 12, 2012, 07:06:04 PM

Quote from: Admiral Yi on March 12, 2012, 02:28:43 PM
The thing I found most interesting about that article is how many private equity deals the Canadian pension funds are doing. [Bain]  :ph34r:

Yeah, I had to laugh about the poke the economist made at the private equity managers who thought they could not compete on price because the Canadians had longer time horizons and less pressure to show quarterly earnings.  All the finaincial folks who want to invest my money keep talking about investing for the future but it took me a while to find someone who actually does.

They are investing for the future.  Just not your future.

Quote from: DGuller on March 13, 2012, 01:11:35 AM
They are investing for the future. 

"They" are?  I suppose if you define future as the results in the next quarter most of them are.