Friday, April 13, 2012
The false stimulus of sacrificed pensions
As has been pointed out, the pension funds are empty. Principally because they have all been spent to lower the effective tax rate, and to forestall the onset of a negative savings rate. However the point should be made, given that Japan is always used as an example, that none of the Japanese believe that the government will be able to honour their pensions. The main effect of this is that the population saves all the harder, offsetting pension spending... In the case of the UK, lowering debt will cause such an increase in the effective tax rate that the division between rich and poor will be defined by your relationship with the state, and nothing to do with working at all, that tenuous link will start to be lost.