The US Has Two Huge Economic Problems, And They Cancel Each Other Out Perfectly en-us Wed, 31 Dec 1969 19:00:00 -0500 Sun, 28 Dec 2014 22:37:04 -0500 Joe Weisenthal Gary Anderson Sat, 09 Mar 2013 12:06:47 -0500 And the generational war they all are talking about is manufactured by Pete Peterson. The war should be because of inequality of income, not between the ages. The war is between the bankers and everyone else, but Peterson is diverting attention from that war by manufacturing another war. c smith Sat, 09 Mar 2013 07:41:22 -0500 Meanwhile healthcare productivity collapses. We're wasting resources because there are no market controls to make people economize in healthcare. We're creating all sorts of "jobs" in healthcare while bankrupting the country. Brilliant. tms. malthaus Fri, 08 Mar 2013 23:45:12 -0500 I only wish it were so. Your missing the big picture Joe. newworldorder Fri, 08 Mar 2013 23:23:19 -0500 Absolutely no right answers just approximate solutions- this is spinning some great thoughts. As you likely already know if there were no other factors to consider a mild monetary stimulation in the 2% range does increase economic growth as the money is arriving just a few moments before it is actually required. This helps confirm a decision to spend or invest that is not reaching the confidence level required to close. You are interested in stimulus so this is not 2% more money but whatever whiff of freshly minted dollars would push prices 2% higher. Most of the 85 Billion the Fed is issuing now is deflation insurance payouts- kind of a Fed Derivative Product. This modified Monopoly is what the Fed is actually doing- Big Fed Computers are advising Dr. Bernanke what they think will happen if certain needles are moved. He will ask them what happens if we go to 2.8% inflation increase or he comes home and says: "You promised me 2% inflation and I am only seeing 1.76%- what the hell went wrong Univac" ? beep beep- Go to 91.5 B/month :-) billwald Fri, 08 Mar 2013 21:19:05 -0500 Social Security funds are handled exactly the same as when FDR signed the legislation. Only change is to more honestly account for the money. billwald Fri, 08 Mar 2013 21:14:32 -0500 Do the new jobs pay above or below the median wage? How low can median income sink before the 4th American Revolution begins? clickbot Fri, 08 Mar 2013 19:42:24 -0500 We ended up literally ripping money in half to "reliquify" as it were -- we considered halving all the prices/taxes (this seemed obvious), but that was too complicated, even though as I recall most prices are even. [A quick search on wikipedia reveals they actually have inflated the money supply of the game about 35% starting in 2008 (!), and that can't be a coincidence :-) ] <a href="" target="_blank" rel="nofollow" ></a> Anyway, there is no "right" answer to this problem, and in fact it might be a decent exercise in an introductory macroeconomics class, maybe even high school level. newworldorder Fri, 08 Mar 2013 17:48:54 -0500 A number of adjustments are taking place simultaneously with the convergence of living standards across the globe as you note with falling comp levels. Economic recovery and growth is considered planet wide especially as trade becomes freer. As machines become more competent the premium a person can extract must fall. newworldorder Fri, 08 Mar 2013 17:39:49 -0500 This is a wonderful way to run simulations especially if you imagine trying to "negotiate" deflationary rules with a very diverse, heavily armed population. Politically, it is so risky almost any amount of inflation is an easier policy to implement. For the Fed 2% inflation is a minimum cushion to avoid such negotiation. The default setting for the system produced by a policy of creating new money via debt instruments in a productivity enhancing tech economy is toward increasing deflation. Note that negative real interest rates are a kind of deflationary policy as applied to savers so there may be a mixture of inflationary and deflationary policies as the Fed tries to tune the monetary externalities. As many have noted older Americans often hold large pools of risk averse assets ( savings) so the Fed shears them to address intergenerational inequities. If a person retires at 62 and expires at 87 these pools will be largely exhausted which is also policy. Concept is that at age 62 you retire at your highest standard of living and this is incrementally addressed in such a fashion that, ideally, the mean citizen expires with a net worth of $0.00 following final expenses. This is an aggregate policy which Warren Buffay will escape. This is another reason to post as this monopoly game played as deflation engineering is something anyone can do that would have never occurred to me. You are providing wonderful guidance to your son, congratulations. Maybe he will send you money in the years to come :-) albertodesignz Fri, 08 Mar 2013 17:10:32 -0500 I'm sorry but please stop squawking the old "we are being taxed to death" argument. Corporations are reporting THE BIGGEST PROFIT MARGINS EVER and CEOs are being paid hundreds of millions of dollars and the wealthy now control an unbelievably disproportionate amount of wealth in this country AND have one the LOWEST effective tax rates in history. All that this line of reasoning does is try a buoy an already powerful Elitist class with more wealth and power hstad6 Fri, 08 Mar 2013 16:05:07 -0500 Geez, I thought John1066 had that comment copyrighted? :) Jon DiPietro Fri, 08 Mar 2013 15:15:40 -0500 Yes, seniors "earned" their social security. The problem is that the government has spent it all and right, wrong or otherwise, future generations will have to pay for it. It's a simple fact that your insults and ad hominem attacks can't change. So did you have any lucid arguments to make about these future liabilities and the problem with the demographics? What's your suggestion for keeping social security solvent? Or is a string of insults thrown at someone you've never met the best you can do? Oi Vay Fri, 08 Mar 2013 15:08:03 -0500 Again with the conflation of Social security.... unemployment, food stamps, etc. ? What will it take for you gumshoe wearin, scab pickin, teabaggin, pencil neck geeks to spare us from the constant characterization of elders collecting their due- what they have paid for- as an un-earned entitlement? Baggers should be careful what they wish for, because the loss of "entitlements" might be just in time for your own retirement. sawyer50 Fri, 08 Mar 2013 14:40:22 -0500 Do you kiss your mom with those lips? Mikent Fri, 08 Mar 2013 14:34:39 -0500 I'm thinking more of the lower paying service jobs - Walmart, fast food, security guard, etc. -I see more and more older folks doing jobs kids used to do. Realist Fri, 08 Mar 2013 14:08:14 -0500 Simple answer, look at the A-10 Unemployment stats: <a href="" target="_blank" rel="nofollow" ></a> The older people are staying the workforce longer and the younger people are staying unemployed. Some people will go to some elastic lengths to defend this irresponsible plutocrats in Washington just b/c Obama is at the helm. I recall how bad the economy was when Dubya had something around 48 months of job growth. I'm not a fan of either of our most recent 2 presidents, but let's remove the insane bias from this administration so we can see more clearly how to solve the issues of the day. citizen1 Fri, 08 Mar 2013 13:55:44 -0500 Onion-worthy article. New American Dream Fri, 08 Mar 2013 13:37:06 -0500 Not sure I follow this. It depends on the job, but why hire a boomer that expects a salary when you can slave labor a new college grad for 1/4-1/3 of the price? clickbot Fri, 08 Mar 2013 13:34:22 -0500 NWO - here is a fun game to play to experience the consequences of a fixed (inflexible) money supply. Try playing the game of monopoly with only half the cash supplied by the game (you might have to use the classic board game where everything is physical). I actually did this about 6 months ago with my son while cleaning out the garage (found an old board game with missing pieces) and it was pretty illuminating. Certainly more fun than I thought it would be. We instituted several deflationary rule changes mid-game, and the game play out ok after that. It's interesting that the rules for monopoly were developed during the great depression! Gimlet Fri, 08 Mar 2013 13:28:28 -0500 But don't forget the robots and computers stealing our jobs. That's still going to be quite a push in the unemployment direction... dave a Fri, 08 Mar 2013 13:06:14 -0500 this argument is so stupid! You need to compare the size of the resultant work force with the size of the retired population. to take the extreme case of a labor- force of 1, with one employed gives 0% unemployment. would that offset 200mm retired? CaptGizmo Fri, 08 Mar 2013 12:58:31 -0500 Why must this country use the word war to describe everything? It almost seems like a subliminal brainwashing to keep this nation in a perpetual cycle of any type of war. Jay D. Fri, 08 Mar 2013 12:56:28 -0500 The key word in Joe's description of Mr. Busigin's qualifications is "amateur." According to the EBRI, nearly half of workers age 55+ have less than $50k saved for retirement. Obviously, there will not be a (voluntary) mass exodus from the workforce any time soon. That anyone is giving a voice to this kind of "analysis" is maddening. Jon DiPietro Fri, 08 Mar 2013 12:47:30 -0500 Should read "The aging population..." Jon DiPietro Fri, 08 Mar 2013 12:46:37 -0500 The again population does account for some of the drop in the labor force participation rate. But this is not a good thing! Workers pay taxes. Non-workers collect social security, medicare, medicaid, unemployment, food stamps, etc... A lower labor participation rate (combined with perpetually growing entitlement spending) means a much heavier burden is in store. newworldorder Fri, 08 Mar 2013 12:37:22 -0500 Thanks for your reply. I find it difficult to handle modern media which is essential inside these tiny entry windows. I am trying to apply maximum compression and provide leads for "viewers" to move on themselves. One of my favorite sources "Wages of Destruction" - Adam Tooze- 800 pages of dense text-hard to tweet that. All will have to struggle hard to understand even with the luxury of 800 pages of expansion. "Origins of the Inquisition" by Netanyahu- 1400(?) pages. It is challenging and I am working at the same time, also declining vision :-) But to answer your question with the agreement that you will do most of the work. Depending on the reader extensive perceptual and philosophical alterations will be required and I cannot know your requirements, right? Are you an empiricist, a positivist, a celtic mystic?..... We use units of money to smooth exchange through a pricing mechanism in some given market by a common denominator like the USD. Whatever is supplied can be converted to a volume of USD which can then be used to acquire any other offered commodity also USD denominated. This is not absolutely necessary as for most of history and prehistory there was no money and until very recently almost all humans were subsistence farmers with all trade and "taxation" done in kind. Fiat currency is the best system we have developed so far- not a perfect system but variance can be narrowed. Simply because we create fiat currency (out of thin air) does not mean it is valueless. This is an error in thinking so a means must be developed to manage that legal tender and account for its circulation- this is essential- and we do this through taxation and the creation of new money as a debt. The role of taxation is twofold: It compels the US economy to accept the USD as the legal tender- taxes police the system- since all must pay taxes in USD all must earn USD so the legal tender is secure. Taxes can also regulate demand by removing USD from the system or restricting consumption of beer by increasing the price. In such a case the accumulated deficits are paid down at the Fed and money is destroyed ( balance sheet reduced). In the US system the Fed creates and destroys new money but the private banks create almost ALL new USD in circulation. Imagine you wish to buy a new car on payments. You contact the "lender" which might be a bank and ask for $20K. That 20K is not created until you sign the note- so you get an asset ( the use of the car) for nothing if no money down and the bank gets an asset (the loan ) also made out of nothing. Money is usually not created until the microsecond it is required which helps control liquidity. Very important that liquidity is correct- inflation over 2.5% is undesirable as is inflation under 2%. We do distribute a lot of goods to people without their work and the money system helps make that opaque for perceptual reasons. Production can only increase by a few % annually so distribution is a question of rationing but you are correct. In 2013 a substantial % of goods and services distributed to the population is income + entitlements and for your purposes you can understand these entitlement as "free." Unbacked fiat is not perfect but is is functional! Vernell Blackman Fri, 08 Mar 2013 12:23:25 -0500 Welcome to Rising Products. Where bringing you the Top Weight Loss, Muscle Building, Cook Books, and Real Money Making Programs right here for your convenience. Erik Jacobs Fri, 08 Mar 2013 12:18:14 -0500 There is one problem with this picture: As important as healthcare is it does not produce goods / services that can be exported. It is a service that can be sold, but a large healtcare sector can on the longterm destabilize the economy. Having said that the US demographic picture is better than that of most of Europe and Japan as it still has a relative large younger population. Cal Fri, 08 Mar 2013 12:05:39 -0500 If all you young kids pitch in and give me 100 grand, I'll retire by 5 O'clock today. Brian Erickson Fri, 08 Mar 2013 12:04:45 -0500 The problem has never been a lack of jobs. Human needs and wants are never ending and the potential jobs (from retiring workers or new services) to fill these needs and wants are without limit. Our economy's problem is one of incentives. By stealing more and more wealth thru taxes and inflation our government has distorted the incentives. This had reduced the amount of capital available to turn potential jobs into real jobs that meet the needs and wants of people. Needs and wants of people in voluntary exchanges not the needs and wants of politicians or coerced exchanges (health care, war, bank bailouts, social security, medicare, etc...). pontius Fri, 08 Mar 2013 11:55:35 -0500 thank you. this person has gotten so brilliant they've forgotten arguments have to have substance and be at least somewhat coherent. hiiidave Fri, 08 Mar 2013 11:54:06 -0500 Joe, That comparison is like saying when eagles die, they are exactly replaced by earth worms that eat up their bodies, thus the two groups perfectly cancelled each other. Sure, the weight of the transfer net out to be the same, but the end result is total different: the quality and caliber of transferred jobs, are totally different. I am sorry, but that amateur economist is exactly that. - Dave pontius Fri, 08 Mar 2013 11:50:39 -0500 you write very poorly. if you are so rational, why do you waste time writing things which cannot be comprehended? secondly, i've processed a bit of your progressive logic, and it would seem then that if things are you say they are, with the inevitability of iconoclastic technocracy, why are we bothering with the pretense of money at all? why are these forward-thinking prophets on the leading edge of evolutionary change engaged in something as barbaric as lending? shouldn't we all stop paying taxes and bills and demand universal welfare and white jumpsuits and pod apartments? Gentleman Trader Fri, 08 Mar 2013 11:50:05 -0500 let them eat cat food j.allen Fri, 08 Mar 2013 11:49:49 -0500 yeah, and who is going to pay for that? albertodesignz Fri, 08 Mar 2013 11:46:11 -0500 These two factors do not "cancel each other out" . Here's the part that they don't address: The purchasing power of those replacing the Baby Boomers has been slammed and continues to dwindle exponentially with each generational replacement. A 65 year old accounts payable professional making 50k - 55k per year retires and is then replaced with a 35 year old with a similar skill set and is paid 30K. In the past, that same 35 year old may have been paid 40K with an opportunity to grow into that 50k. This kind of "underemployment" is rampant and will continue to hamper any kind of long term economic recovery. newworldorder Fri, 08 Mar 2013 11:45:51 -0500 Thanks for the reply. Ransom Olds and Henry Ford were born in 1863/64 and though both have been dead for over 60 years the average poster on BI has no concept of how the revolutionary changes they and others set in motion actually functions. More than any other person Dr. Deming systematized this through PDCA-Plan-Do-Check-Act and he died about 20 years ago. Much of what I post here refers to knowledge and better practices that are well known and developed and over 100 years old. The USA largely founded this integrated approach, taught it to the Japanese and other Asians after 1945 and they are beating us with our own hammers. Fate and the Apocalypse perspective is the Middle Ages point of view. dart Fri, 08 Mar 2013 11:42:36 -0500 But...wait. How is unemployment going down with the antibusiness Obama policies? May be they never mattered after all. I guess those companies who are creating jobs do not give a damn about Obamacare and those that are struggling want to point the finger in that direction as an excuse. you got it. Fri, 08 Mar 2013 11:30:27 -0500 Current max SS is about $30K, assumes higher income and higher lifetime contribution. Assume most earn 50% of max or less. The current means testing impacts medicare payment. 15% marginally employed are paying way less than $6K. Even if they remove the salary cap of $110K for withholding, I wonder if even those earning $400K without a withholding cap couldn't keep us even. Mike Miller Fri, 08 Mar 2013 11:25:02 -0500 That guy is an engineer ? I thought they were good at math. So Mr. Engineer,who pays for that health care ? The bankrupt US Govt ? The Best Solution Fri, 08 Mar 2013 11:24:19 -0500 The best solution to help the Baby Boomers retire. After what their generation did to America, this is the perfect solution. We should build "retirement camps" where they would be working part of the day for the maintenance/food preparation of the camp and watching tv for the rest of the day. They would stay there until they die. Hey, at least it's not prison... newworldorder Fri, 08 Mar 2013 11:23:24 -0500 Entitlement spending in terms of discretionary income and service entitlements such as Affordable Health Care will comprise an increasing share of incomes. People will have their employment income, if any, topped up with entitlements the value of which will be conveyed largely as public goods. TEP Fri, 08 Mar 2013 11:20:43 -0500 This is ridiculous; absolutely ridiculous. The way this ends is the elite creates a genetically selective pandemic that kills everybody above the age of 70, within 48 hours. bullcrap police Fri, 08 Mar 2013 11:15:00 -0500 Are you apprenticing for the job of taurine scatologist? Gerry Mihalick Fri, 08 Mar 2013 11:12:33 -0500 Good analysis BUT - I think the only problem is that so many people want to retire, but can't. 401k 's and investment portfolios fall short, and interest rates are zero. So there is a log jam at the exits - which keeps the younger workers out. Mikent Fri, 08 Mar 2013 11:11:00 -0500 Looks like Joe just went through the comments and gave everyone a thumbs down. Mikent Fri, 08 Mar 2013 11:08:23 -0500 Makes sense that an employer would hire an older boomer over a 20s something. The boomer has Medicare and Social Security and doesn't need the healthcare and higher wages demanded by the younger worker. Also, the boomer is also OK with a part time job. N Fri, 08 Mar 2013 10:58:08 -0500 Seems like a huge simplication of reality. The US population is getting older and there or will be more people over 65 than in any other age bracket, but given what has happened over the past five years and what seems like will continue to happen for some time, what that demograhic shift will most likely mean is that people will retire later, businesses will not hire on a one to one basis, when they do hire it will be at lower pay and/or less benefits and that the government will only have increasing costs around healthcare and other benefits. To name just a few. Besides, this sort of shift happens over a looooong time, by the time it really kicks in, lots of people will be even worse off than they are today. All one has to do is to look at Spain or Italy, they are further along on this demographic shift than the US and look at their economies. Northeaster Fri, 08 Mar 2013 10:56:14 -0500 This has been obvious for many years, all you had to do is look at census figures: 74 million boomers aging out now and, as a normal part of life, requiring more care. One might think that given their independent past, these folks are going to want to remain active & independent as long as is possible, therefore, aging in place which will require a whole lot of house calls combined with in home monitoring. Pressure will be on to make homecargiving a living wage profession after eons of mini wages. newworldorder Fri, 08 Mar 2013 10:45:41 -0500 Many have accumulated enormous "viral loads" in their personal ecosystems especially resident neurophilic viruses. As their immune system deteriorates with age these afflictions return. Many plans will go off the rails as seemingly robust health suddenly deteriorates. Mikent Fri, 08 Mar 2013 10:43:37 -0500 Is it just me, or is BI sounding more and more like the rah-rah MSM ? They seem to be following the HuffPost's game plan - more fluff, more rosy scenarios - and wait for the big payday buyout from Yahoo, AOL or CNBC. The above story is a new low. No depth. No insight. But the comments are right on. I find myself gaining more knowledge from the comments 'Water Cooler' section calling BS on the latest 'Everything is Wonderful' story. Alfred Know Fri, 08 Mar 2013 10:40:39 -0500 Matt, the numbers make sense from a macro economic standpoint. But there are two significant issues that are being masked here: the age at which boomers are retiring, and the extent to which they can impact economic spending once they do. Most middle class boomers have had the values in their primary asset, (their home) and their retirement funds seriously whacked in the past 5 years. This is resulting in many boomers now putting off retirement until much later or even given up any hope of doing so. So that will slow the rate at which employment opportunities for younger workers open up. Secondly, once a lot of these boomers do retire, they will have a lot less to spend on a day to day basis so their contribution to GDP will be lower than it would have been before the crash. Its all about timing, as unfortunately, a lot of boomers who did do some retirement planning have been caught in the economic cross-fire. This is particularly the case for many of those who were expecting to sell their homes and downsize about now. newworldorder Fri, 08 Mar 2013 10:40:21 -0500 While a sound observation Medicine is far better at extending terrible states of health than it is youthful vitality so while a person way wish or need to continue working he/she will simply not be able to. Many will assert that they will work to 75 but go wobbly at 62 and fall out of the ranks. 7-8,000 mostly older people people pass away daily and as they do all earthly concerns are dissolved and assets, if any, are surrendered. MrPeabody Fri, 08 Mar 2013 10:31:05 -0500 Ah, the economist sees two problems canceling each other, but not twice as many victims as either problem separately. Mr Thrifty Fri, 08 Mar 2013 10:29:25 -0500 >They do not 'cancel each other out perfectly'. Maybe not, but you also have to consider that Boomers delaying retirement, or working while retired, due to a lack of savings, will still be paying payroll taxes into the system for 5 - 15 years longer than originally expected... Bensky Fri, 08 Mar 2013 10:26:02 -0500 However, an increasing number of retirement age individuals are opting to remain or move back into the labor pool as their savings vaporize and areas critical to their well-being, notably food and medicine, continue to increase in cost. newworldorder Fri, 08 Mar 2013 10:26:01 -0500 Mr. JW: You are on the right track for a brilliant career and a great Life. Problems are inevitable. Solutions are possible. Today's problems are generated by past solutions to problems in the past. Solutions can only be partially successful since conditions change. Mr. Busigin is looking for solutions with the elements we have in current conditions to resolve sharp economic problems. Go/No-Go is decades out of date. We look to narrow variance not for perfect answers. ChumBucket Fri, 08 Mar 2013 10:25:11 -0500 If only this were true. Unfortunately, the data indicate that the greatest increases in participation rate are among the 55-64 year olds and even 65-74 year olds. The biggest declines in participation rate are among the 16-24 year olds and 25-54 year olds. Here's the data: <a href="" target="_blank" rel="nofollow" ></a> Mike B Fri, 08 Mar 2013 10:24:08 -0500 A bit like claiming a rise in amputation rates helps when there is a shoe shortage. Irrelevant Fri, 08 Mar 2013 10:24:00 -0500 Why do I bother clicking these links. Another wasted story, and I've wasted my time. black swan Fri, 08 Mar 2013 10:23:08 -0500 "When your two biggest problems are unemployment and a large generation wanting to retire, this is an opportunity & solveable problem." Yes, if only "wanting" was the same thing as getting. Much of the baby boom generation is now living from paycheck to paycheck, and are sporting pensions that will have dubious values at best. Good luck with that retirement idea. Maybe they can retire on the less than 1% interest they make on their near zero balance savings accounts. Jacko Fri, 08 Mar 2013 10:22:43 -0500 What? Inane analysis. BI, please stop Joe from just publishing other peoples charts/findings without any further analysis. Have these two jokers not been paying attention to what is actually happening in the real world of corporations. Productivity is much higher at US companies, because they don't need anywhere near the same levels of service/back office employees as they used all these retired folks are not leaving open positions to be back filled. Manufacturing jobs are overseas and all the rest of the service type jobs are shrinking in both automation/and overseas shifting. There is a larger and larger portion of the US population that (private sector) jobs will not exist for....and that demographic/trend is showing absolutely no signs of changing. Bob123 Fri, 08 Mar 2013 10:20:02 -0500 50K salary is the medium income in America. Dude, that's way too high. Joe Scamolla Fri, 08 Mar 2013 10:19:14 -0500 A great theory, except that most baby boomers have had more than 50% of their savings wiped out since 2008. They would love to retire except that without saving and a meager pension for the lucky ones, the thought of eating dog food covered saltines in the dark, freezing their butts somehow does not seem very appealing. Bob123 Fri, 08 Mar 2013 10:18:47 -0500 At least one of them is not an economist. Maybe neither is. The truth is the baby boomers don't want to retire because they can't (average retiree has a total wealth of just 80K). The truth is the baby boomers also want to spend every single dime out of Medicare. On the other hand, youth unemployment is higher than ever. Every once in a while some idiot came out to say this is not a problem, but a great symbiosis? Call him a Obama cabinet candidate. Hank Rearden Fri, 08 Mar 2013 10:16:10 -0500 Labor force participation does not include those that are not part of available labor force. Jaydee Fri, 08 Mar 2013 10:11:45 -0500 A pretend wannabe economist citing an amatuer economist. I think BI has just sunk to a new low. Downhill from here Fri, 08 Mar 2013 10:07:31 -0500 Let's do a little math. If you assume that the average annual wage for a new job created is $50,000 (and this is high), then that job generates a little more than $6,000 per year in Social Security and Medicare taxes. This is far below the average annual Social Security and Medicare consumption of a retiree. They do not 'cancel each other out perfectly'. You need job growth far in excess of retiree growth ..... and that ain't gonna happen. neo K Fri, 08 Mar 2013 10:00:56 -0500 Labor force participation peaked in 1998 and has been going down ever since. While the recession accelerated the decline, the vast majority of our decline in labor force participation is due to retiring baby boomers.