[scepticus]

I was ruminating the other day about how you 'go long labour' in a future characterised by demographically induced labour shortages. I came up with the idea of labour backed bonds in which you invest in a mutual fund that educates young people in a given specialism, and in return these young people promise a %age of their future income for a given period to the fund. Kind of instead of student loans or taxpayer funded education.

In a future constrained more by labour availability than by land or capital shortages, this would likely be the best asset class in which to save. I was thinking like, 'the goldman sachs long AAA United Kingdom PHD medical practitioners 5yr'. That is, the fund invests in the education and training of future medical doctors and takes a percentage of their first 5 years income.

I thought this was a pretty clever idea on my part, but as with all good ideas, turns out someone already thought of it:

http://ftalphaville....e-backed-bonds/

" The world of complex financial products can often seem like a bizarre alphabet soup. To many of those outside high finance, securities like CDOs, ABS, RMBS, and CMBS are nothing more than a jumble of letters. And to many of those who remember all too clearly the economic crisis of 2008-2009, these little acronyms sound downright dangerous.

The problem then was bad assets. The solution is good assets.

And Thackeray Walsh knows where they are. They’re everywhere across our vast country, in our schools, our homes, our baseball fields, even our malls. They’re America’s most accomplished teenagers. And the future lies with them.

But many of them need money. They need it to go to the best colleges, get advanced degrees, and become the engines of America’s economic growth.

That’s where TBBs come in.

TBB is shorthand for teenage-backed bond. Thackeray Walsh has pioneered the architecture for TBBs and plans to launch the first one in October 2013.

That debut is called Genius Trust 2013 (GT). Further issuance of TBBs arranged by Thackeray Walsh will be executed under the Genius Trust© name.

How does a TBB work?

As crafted by Thackeray Walsh, TBBs are very similar to student loans, with a few key differences.

One is that the ultimate lender to the student isn’t a bank, it’s an investor.

When GT launches, for instance, the first batch of investors* to purchase the bond will effectively be lending their money to the batch of teenagers backing GT.

In return, the investors will, after a very long grace period, receive a return on their investment. Those payments will come from a share of the teenagers’ earnings, most of whom will be working adults once the grace period is over, in 13 or so years.

The risk of the bond – whether investors will get their money back and reap an attractive return – lies with the teenagers and whether they become productive, high-earning individuals in their late 20s and beyond.

That’s why Thackeray Walsh’s staff of seasoned bankers has rigorously selected for the highest caliber students. These are freshman, sophomores and juniors in high school that have shown they have what it takes to succeed and become driven, prosperous Americans.

*This explanation simplifies the structure, as the investors holding the bond can change over time, especially since we anticipate active trading in its 30-year life."

[scepticus]

ofc injin is going to really hate this.

oh well.

[Dorkins]

Sounds like you want a return to indentured servants. Unfortunately the government has beaten you to it with student loans, which even bankruptcy won't clear.

Edit: I agree that 'long labour', if you can figure out how to do it, is the trade of the quarter century.

This post has been edited by Dorkins: 12 August 2010 - 02:27 PM

[right_freds_dead]

i dont think younger people would be arsed with your scheme as theres no reward for their work.

[scepticus]

Dorkins, on 12 August 2010 - 02:23 PM, said:

Sounds like you want a return to indentured servants.

its no different to a graduate tax (current tory proposal I think), a student loan or whatever.

the point is it is arranged by the private sector, for the private sector.

the second point is that before very long the only asset class that will be holding its value is labour. About time too.

and that means people will want to invest in it, and the market should ensure that the young students get a fair price.

[edit: and of course part of the beauty of it is that it introduces a price signal that transmits information about the skills industry actually needs. You want to do underwater basket weaving? That'll be 20% of your income for 20 years then. Why not consider 'electric drivetrain engineering' instead?]

This post has been edited by scepticus: 12 August 2010 - 02:34 PM

[Grrrr I'm a tiger]

scepticus, on 12 August 2010 - 02:32 PM, said:

its no different to a graduate tax (current tory proposal I think), a student loan or whatever.

the point is it is arranged by the private sector, for the private sector.

the second point is that before very long the only asset class that will be holding its value is labour. About time too.

and that means people will want to invest in it, and the market should ensure that the young students get a fair price.

[edit: and of course part of the beauty of it is that it introduces a price signal that transmits information about the skills industry actually needs. You want to do underwater basket weaving? That'll be 20% of your income for 20 years then. Why not consider 'electric drivetrain engineering' instead?]

I already put forward this suggestion on this forum and it met with quite a lot of agreement from those not taking on the risk!

[lowrentyieldmakessense(honest!)]

[right_freds_dead]

lowrentyieldmakessense(honest!), on 12 August 2010 - 03:03 PM, said:

haha

[scepticus]

hotairmail, on 12 August 2010 - 02:53 PM, said:

I already put forward this suggestion on this forum and it met with quite a lot of agreement from those not taking on the risk!

link?

[Laura]

I showed this thread to my mathematical partner & asked him for an equation we could use to reliably work out the securitization costs of a chipped chav.

[Grrrr I'm a tiger]

scepticus, on 12 August 2010 - 03:14 PM, said:

link?

I can't find it. You may be able to. the search function here doesn't seem to pick anything up after 2009!

Anyway - mine was slightly different in that I felt the university should disburse the funds and take the risks...that way they would be incentivised not for drawing people in to do useless things that people want and then repent at their leisure (and it probably would be leisure albeit uncomfortable), but on things that are likely to add value, get a job etc.

Aside from altering the balance of subjects taught, they would also examine the quality of their teaching staffs, their courses and actively incentivised to help with careers etc.

All in all a jolly good half thought through idea.

[scepticus]

Laura, on 12 August 2010 - 03:29 PM, said:

I showed this thread to my mathematical partner & asked him for an equation we could use to reliably work out the securitization costs of a chipped chav.

was there one?

[dom]

There's too many people working already and not enough jobs. All the economic/environmental/social problem we face are symptoms of over production/consumption. The future is less work.

Is this a practical joke BTW?

[Laura]

scepticus, on 12 August 2010 - 03:32 PM, said:

was there one?

He thought so

[scepticus]

dom, on 12 August 2010 - 03:37 PM, said:

All the economic/environmental/social problem we face are symptoms of over production/consumption. The future is less work.

demographics don't support this conclusion. Sure it is true today, but in 10 years, different story.