Saturday, March 17, 2012

Boomers crashing the country

When protecting pensioners is no longer in the national interest

Unusual article from the Guardian querying whether pension obligations should be able to cripple companies. This, writ large, is the case for the UK generally. Whenever I read about the wealth of the boomers, I always think, what wealth? Pension contributions, if made at all, were directed to government debt specifically for immediate spending. There was no real saving. Look at rents and taxes. Consider how much of direct taxation is channelled to boomers through artificially high housing benefits, debt servicing costs. Government debt of this form is incredible, we accept that one group borrow to spend on themselves but another pays it back.

Posted by stillthinking @ 07:36 AM (1438 views)
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10 thoughts on “Boomers crashing the country

  • stillthinking says:

    My key point: I don’t think the boomers have any real wealth at all, apart from that which is channelled by the government from taxation. I also wonder why the morality of continuing these generous unfunded payments is never questioned. I also wonder why -state- workers are not on the -state- pension. What kind of naming scheme is that if only the private sector gets it?

    The consequences of doing this are having increasingly bad consequences for the country as a whole. Everybody is aware of housing. However, there is never going to be substantial direct investment in a country where the government spends over 50% of GDP. We -know- what is required for investment in the UK, it should be around 30%. We cannot cut because of -obligations- to the boomers and keeping the whole charade of state continuing. I am sure that if you were to sample a few and tot up the various unearned stipends received from government, there would be very little boomer wealth outside of that.

    But, if there is no way to carry on, perhaps we should consider curtailing these inter-generational transfers rather than waiting for them to collapse by themselves with the economy.

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  • I often query why in these times of austerity, the country is committed to making swingeing cuts to new pension scheme entrants and those not yet retied, while honouring previous commitments to existing pensioners and near-retirees.

    After all, if their pensions were economically unsustainable (thereby creating the current shortfall in pension schemes), why don’t they share any of the austerity burden? Why can’t pension funds and the government renege on the commitments made to them?

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  • Nah. Let’s just stick our heads in the sand.

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  • Sitting on the sidelines, saying nowt and watching this tug-of-war, is the finance sector. Investment funds that manage pensions in the UK typically take 40% or more of the value of a pension in fees. In the rest of Europe these fees are negligible. And how much did pension and mutual funds lose by lending to investment banks and buying their derivatives/CDOs in the bubble period, when fund managers were under pressure to go for yield instead of safety?

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  • The Mirror is an interesting example here, the pension fund robbed by Maxwell. I note that no mention is made of the pension holidays taken in the 80s by employers when markets were booming. But these schemes are not unfunded, just underfunded, partly because of rising longevity, partly mismanagement (holidays included), partly parasitisation by the financial sector. The suggestion that all pensions should be run publically makes sense.

    Considering we have had more or less continuous financial growth since 1945, one has to ask why these imbalances have arisen. Beyond the above details, they are due a fundamental inequality that is now developing rapidly. Some of the pension beneficiaries are in a good position, but by no means all. The real beneficiaries are not the boomers specifically, but the relatively small but increasingly wealthy band of individuals who will no doubt receive more advantages in the coming budget at the expense of the rest of us.

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  • mark wadsworth says:

    Stillthinking: “My key point: I don’t think the boomers have any real wealth at all, apart from that which is channelled by the government from taxation.”

    Oh yes of course, their main sources of wealth are publicly collected taxes paid out to them as salaries or pensions; and privately collected taxes (land rents and inflated selling prices).

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  • general congreve says:

    Whatever, nothing serious is going to change whoever much anyone points out the unfairness and the mismanagement. I suggest saving breath and leaving the politicians, and the selfish boomers, too it, until it all shortly collapses in on itself. I’m not worried.

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  • stillthinking says:

    MW, I mean that, but what I mean is this payment is supposedly subsequent to paying in. I think that effectively there has been no paying in. The government debt has steadily increased over the decades, and at every step nearly every contribution to government has been returned to the population.

    The government has in effect been offering a pseudo-saving facility, allowing boomers to pretend to save but actually immediately receiving the savings back. You could attempt to explain this away as flow of funds is all that is important, or the Labour line that the debt doesn’t matter. Actually the channelled taxation is funnelled to boomers for no reason, simply they are not due that money. So laid bare, their voting presence in the UK is parasitic, confiscating real earning and denying land access.

    So lets do them over.

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  • “The government debt has steadily increased over the decades..”

    Not so (unless you just look at nominal figures perhaps). Dept/GDP was much higher in the past. It’s peaked a little recently because of the financial crisis (little to do with govt spending as such). Cutting debt is more about politics than economics.

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  • stillthinking says:

    OK. Fair enough. My opinion, I think that increasing government debt is a false contributor to GDP. I think that should that debt even hold still, there will be a substantial fall in GDP and that any reduction in government debt would force GDP down as an accelerant. I don’t mean in the New Labour sense that if the government doesn’t spend into the economy then things will get worse, I mean that we count the change in debt as GDP in the UK, but this is false accounting. Government debt is an amplifier in both directions. Debt GDP perhaps was far higher in the past, but those debts(or levies~) were not paid. Currently the suggestion is that we pay them, that is not the same.
    Additionally, I think that there are debts hidden in every single nook and cranny possible. Pensions, PFI. If you see one cockroach.. What is available to the eye, frightening as it is, is only a hint of the real level. We can see a currency in collapse, a trade deficit, rising unemployment, folding inadequate infrastructure, skills shortages, stalled business investment and rising poverty generally. Really people are getting poorer each year. I think that everybody has become so conditioned to the idea that the Tories take over for a while that they ignore the possibility that the UK could become a poor country, but this seems very real to me.
    I forgot who said this, but credit is not a payment system, only money is. You can expand credit all you like but you can only settle your bills with money and I don’t believe the UK has any, whether for investment or whatever, and I am not sure giving credibility to New Labours bribes, because that is what they are, is worthwhile.

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