By Philip Pilkington, a writer and journalist based in Dublin, Ireland
More pension funds are getting their act together and calling the British government on their dodgy pseudo-stimulative policies. The British pension provider Saga has released an excellent counterargument to the recent round of QE announced by Bank of England governor, Mervyn King (an argument that we have been pushing for some time).
Saga are seething and you would guess that pension recipients are no less enraged because the effects that QE is having on pension funds appears to be quite devastating. Dr. Ros Altmann, Director-General of Saga, made the following statement which will resonate with many:
The Bank of England has consistently ignored the dreadful damage that its QE policy has inflicted on anyone coming up to retirement. During 2012, record numbers of people will reach age 65 and many will need to buy an annuity. Around half a million annuities are sold each year and, since 2008, annuity rates have fallen by about 25%, most of which is due to the effect of QE. That means over a million pensioners will be permanently poorer for the rest of their lives, as they have bought an annuity at rates that have been artificially depressed by the Bank of England.
What’s more annuity rates – that is, the rate at which pensioners draw down income – has dropped significantly:
Annuity rates have plunged, meaning the people’s hard-earned pension savings are not giving them the pension income they could have achieved even just a few months ago.
That means less spending power in the pockets of pensioners; and that, in turn, means less demand in the economy.
Back in 1995 British pensioners were offered a new, more risky but potentially more profitable option called an ‘income drawdown’. Helen Pow at the Daily Telegraph explains the income drawdown as follows:
Income drawdown allows people to take an income from their pension savings while leaving it invested in the stock market. It is an alternative to an annuity – which involves you handing over your pension savings to an insurance company in exchange for a guaranteed annual income for the rest of your life.
But even going down this route – which is far more risky than buying annuities – won’t allow Grandma and Gramps to avoid the ravages of QE. Saga again:
If they decide not to buy the annuity but go into income drawdown instead, they will also be hit by QE because they amount of income they are allowed to take out of their pension fund is determined by the Government Actuary Department’s (GAD) rates, which are themselves based on gilt yields.
Which makes perfect sense because, as Helen Pow explains:
Typically these [income drawdown] funds are invested in a combination of shares, cash and fixed-interest investments such as bonds and gilts.
Simply put: QE programs hurt pensioners big time – and the more QE they pump in, the more they damage pension funds. Indeed, back in October James Kirkup at The Daily Telegraph reported that the last round of QE sapped money from pensioners to the equivalent of around £3,750 a head. That’s a big chunk of change.
Saga have largely come to the same conclusion as we have on the Quantitative Easing programs being run by the UK and the US:
There have to be more intelligent ways of using newly created money that would more directly stimulate the economy, rather than resulting in millions of poorer pensioners for years to come and company pension schemes draining much-needed resources from their sponsors. Indeed it would be better to just drop pound notes from helicopters and let people spend them, than buying gilts and seeing the money disappear into bank balance sheets while worsening pensioner prospects.
John Maynard Keynes couldn’t have put it better himself. Of course, there are better ways to distribute newly issued money to people; you could employ them, for example, or you could cut taxes massively. But Saga’s main point stands. QE is dodgy policy and real stimulus is needed urgently.
Thankfully, with companies like Saga getting the word out through press releases, this phenomenon is no longer just confined to FOMC meetings. Increasingly it is coming into the public eye.
Saga are also right not to point their guns at Mervyn King and other central bankers; they’re doing the best they can given the circumstances in this regard. The real problem are the stubborn and intractable governments in the US and the UK who, despite having their own currency and hence extremely low interest rates, simply refuse to engage in real stimulus policies.
Spending policy in these countries is being run by economic vandals and so, with these thugs on her case, it’s no surprise that Grandma is too scared to take a trip down to the local shop and engage in some good old-fashioned economic-stimulating consumption.
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Of course, there are better ways to distribute newly issued money to people; Philip P
Says who? If the government enforced counterfeiting cartel has cheated everyone (and it has) then restitution is in order.
you could employ them, Philip P
So the victims have to earn AGAIN what was stolen from them?!
for example, or you could cut taxes massively. Philip P
The banking cartel has cheated EVERYONE, not just taxpayers.
Just give the new money directly and equally to the entire population as Steve Keen suggests:
A Modern Jubilee would create fiat money in the same way as with Quantitative Easing, but would direct that money to the bank accounts of the public with the requirement that the first use of this money would be to reduce debt. Debtors whose debt exceeded their injection would have their debt reduced but not eliminated, while at the other extreme, recipients with no debt would receive a cash injection into their deposit accounts.
The broad effects of a Modern Jubilee would be:
Debtors would have their debt level reduced;
Non-debtors would receive a cash injection;
The value of bank assets would remain constant, but the distribution would alter with debt-instruments declining in value and cash assets rising;
Bank income would fall, since debt is an income-earning asset for a bank while cash reserves are not;
The income flows to asset-backed securities would fall, since a substantial proportion of the debt backing such securities would be paid off; and
Members of the public (both individuals and corporations) who owned asset-backed-securities would have increased cash holdings out of which they could spend in lieu of the income stream from ABS’s on which they were previously dependent. from http://www.debtdeflation.com/blogs/2012/01/03/the-debtwatch-manifesto/
This favors those who have previously borrowed to inflate assets from commodities to questionable paintings to housing to farm land.
No it doesn’t. Non-debtors would receive an equal amount too.
Yes, it does.
How? And if you say “price inflation” then I respond that that could be prevented with a ban on further “credit creation” (a form of counterfeiting) and a metering of the restitution checks such that they just replace existing credit as it is paid off.
So there is really no excuse for opposing a universal bailout, is there?
I was talking about those who have previously borrowed, not further credit creation.
Some people borrowed to speculate in gold so that gold is now $1700/oz. So, for example, if you and your neighbor each had $4,000. You borrowed another $1000 to speculate (for a total of $5000) in gold when it was $1000/oz, so now you have $8500 worth of gold and $1000 in debt while your neighbor has $1000 plus some miniscule interest. If you and he each now receive $1000 (plus that miniscule interest) from the government, you will have $8500 in gold with no debt and your neighbor will have about $5000.
From the perspective of those who believe gold should correct down to $1000/oz, you are favoring those who have borrowed previously to speculate, by removing the deleveraging risk.
Make the $1000 in ‘while your neighbor has $1000 plus some miniscule interest’ $4000 instead.
you will have $8500 in gold with no debt and your neighbor will have about $5000. MyLessThanPrimeBeef
Assuming the price of gold (and other “assets”) is not being held up with more counterfeiting – credit creation – or the expectation thereof.
Also, you neglect the interest payments the gold speculator would have to pay and since the restitution checks would be metered to just replace existing credit as it is paid off then prepayment would not be likely to occur. That might be insignificant for a $1000 loan but it certainly isn’t for a 30 year mortgage.
Nice try though.
Assuming the price of gold (and other “assets”) is not being held up with more counterfeiting – credit creation – or the expectation…(Beard)
—
There are other risks.
I am talking about unnecessarily and favoring a certain group of speculators by reducing their deleveraging risk, out of many risks.
——-
…the restitution checks would be metered to just replace existing credit as it is paid off then prepayment would not be likely to occur. (Beard)
———–
Whether it’s likely or not depends on how big the checks are. You did write ‘a substantial proportion of the debt backing such securities would be paid off…’
All in all, it favors all those who borrowed to speculate in the past, by trying to prevent bubbles from deflating.
Whether it’s likely or not depends on how big the checks are. You did write ‘a substantial proportion of the debt backing such securities would be paid off…’ MLTPB
The size of each restitution check (per month) would be TOTAL_US_PRIVATE_CREDIT_DEBT_REPAYMENT_PER_MONTH / TOTAL_NUMBER_US_CITIZENS. That amount would taper off to zero as existing credit debt was repaid with no new credit debt to replace it.
All in all, it favors all those who borrowed to speculate in the past, by trying to prevent bubbles from deflating. MLTPB
Baseless assertion. You cannot ignore the interest for 30 years for either the debtor (he loses) or the non-debtor (he gains).
That’s risk the speculator takes. He probably thought the gain would outweigh the interest payment, unless the bubble is deflated. But that’s his business, not mine.
As for prepayment, either debt gets paid down or it does not. For your scheme, your stated goal is you want to reduce debt.
For your scheme, your stated goal is you want to reduce debt. MLTPB
My goal is abolition of the counterfeiting cartel and just restitution for the entire population, including non-debtors, WITHOUT price in(de)flation risk.
And your goal is austerity? Should you be hanging out at mises.org instead of here?
This is from your post above:
Debtors would have their debt level reduced;
Sorry, if this sounds impolite, but I might have been to mises.org only once or twice. I don’t even remember. It’s not something I pay attention to.
My goal is abolition of the counterfeiting cartel and just restitution for the entire population, including non-debtors, WITHOUT price in(de)flation risk.
—-
Do you mind if I ask you a questio about the above?
Debtors would have their debt level reduced; MyLessThanPrimeBeef
So they would. And how is that unjust for an underwater home owner? Hmm?
Do you mind if I ask you a questio about the above? MyLessThanPrimeBeef
Something along the lines of how much I would gain personally? Well, I am debt-free so I would fall in the non-debtor category.
I am just trying to find out if that is your stated goal or not. Sometimes, you say it is; other times, you say it’s not.
Nothing personal like that.
Well, can I ask a question about that quote of yours?
It’s about the mechanism for no further credit creation.
It’s about the mechanism for no further credit creation. MLTPB
1) Require matching maturities for deposits and loans.
2) Abolish the lender of last resort.
3) Abolish open market operations.
4) Abolish borrowing by monetarily sovereign governments such as the US.
5) Abolish government deposit insurance. Let monetarily sovereign governments themselves provide a risk-free fiat storage and transaction service that makes no loans and pays no interest.
6) Allow genuine private money alternatives to usury such as common stock.
a metering of the restitution checks such that they just replace existing credit as it is paid off.
—-
This is the quote from you that I would like to ask you a question about.
I figure the repayment of just mortgage debt alone would (from memory) allow every US adult citizen to initially receive $304/mo without an increase in the total money supply (reserves + credit). The repayment of student debt, credit card debt and auto loans would increase that amount substantially.
Ok, here is the question.
If a big city runs a homeless shelter with borrowed money, and when it comes due, say $100 million, it pays it off and each citizen in America gets a little less than $0.50 in restituion non-couterfeit money.
How long does it take in the capital formation process to mass that sum again so it can be put to good economic use?
How long does it take in the capital formation process to mass that sum again so it can be put to good economicuse? MyLessThanPrimeBeef
Monetarily sovereign governments have no need to borrow or even to save (meaningless if the government can create money at will). They should simply spend money into existence and tax it out of existence as necessary to control price inflation.
Also, you conflate “money” with “real capital” They are distinct however much the bankers would like to confuse the two.
But nice try conflating the needs of the homeless with a 4-bit restitution for the general population. The Devil would be proud!
A city government is a monetary sovereign?
I have one more question. Can I ask you without risking making the Devil happy?
@MLTPB,
Doppelganger Post II.
http://blog.mises.org/15228/life-without-the-fed-the-suffolk-system/
Beard… 46 comments out of 110..
F. Beard January 6, 2011 at 11:33 am
J. Murray is correct: the welfare state is the warfare state turned in on itself. The Anti-Gnostic
The US is a battle ground for fascists and socialists with only an occasional true libertarian. Many of the fascists think they are libertarian! And of course the socialists speak of “freedom from want” at the expense of others.
Skippy… um… true libertarian thingy, I guess?
A city government is a monetary sovereign? MyLessThanPrimeBeef
I don’t see why it could not be – IF the money it created was only legal tender for that city’s taxes and fees.
Or if a city wanted to borrow, the option of honest taxation would exist instead of the sneaky, regressive “stealth inflation tax”.
@beard,
It would induce more fraud, the private sector is rife as it is, add more?
I don’t trust any company, period. So now people would have to trust multiple business identity’s, with multiple coupons, remediable at what rate[s, fixed – variable time preference thingy – company could change rates arbitrarily, cough stealing purchasing power, cough sneaky stealth tax on good libertarian people.
Skippy… how many people have you had to supervise at one time… eh. Again the private sector is the bad actor in this debacle, the government has, more than not, done more for the people than it historically. Where is your evidence!
So Steve Keen is coming around to my view now! I wonder whether I played some small part, by suggesting on his blog that debt forgiveness doesn’t work politically because it will be seen as unfair by those without debts.
So Steve Keen is coming around to my view now! reason
Yep, it’s catching on.
“Yep, it’s catching on.”… beard.
Where?
Skippy… Evidence?
Here ya go. My word isn’t good enough for you yet?
http://www.guardian.co.uk/commentisfree/2012/jan/26/economy-uk-high-street
That justice thingy… Can’t be denied forever?
One op-ed from the Guardian? Did you read the comments?
Most want a rational rethink of the economy, not a spending spree. Again, how do you enforce compliance to settle debt first (btw how does debt extinguishment stimulate the economy?}, whats your ITP?, what level or agency state or federal is responsible for disbursement, when did throwing price at something fix it, when did more of what broke the system make it better in the long run?
Skippy… how much are you payed to travel the webs and spew koch brothers bile? You on so many sites, spamming away.
Per the Yaroufakis interview yesterday. This is just an extension of the last 40 plus years of warfare using interest rates as the primary sabotage. We will keep our inflation rate low if we have to kill all our dotty seniors to do it because it forces other countries, by comparison, to inflate all their underlying wealth away in their dedication to run socially responsible countries. We are watching this havoc unfold in Greece – they have to recalculate the “debt” almost on a daily basis. The EU has dropped their interest rates (ECB) on bank loans already; and now comes austerity. But the EU can’t slash pensions, print money or do ZIRP. They can only do that if they form a fiscal union. They are busted either way because we are going to keep our ZIRP attack going until the rest of the world staggers and falls. At which point we will generously offer them military support. Wicked. And no wonder our banks just got out of jail free. Duh.
Unless our government/military is stealth environmentalist, and only muscling our control over established sources of oil to begin to restrict oil’s use as a fuel – it is capitalism carried to an absurd and abusive extreme. But if we are (hey, it’s possible) doing this aggressive stuff in the Middle East methodically to force the rest of the world, all of whom were addicted to oil by us, to find alternative and cheaper energy then that would be cool. But it also would undermine our national financial safety net. Keeping the price of oil high maintains our economic viability as long as we also continuously impoverish our own lower classes in an effort to keep inflation low. If the world turns to renewables, our economic model will overthrow us. Betcha there is a contingency plan. Since this is a democracy it would be nice to know what that might be.
The contingency plan is to make sure that the world won’t turn to renewables, which won’t be hard, since renewables aren’t a realistic option for powering the current economic model anyway. As for breakaway economies/lifestyles who decide to go it alone, our current corporate/imperialist masters seem to have that safely under control as well. As it turns out, there’s very little that can’t be safely commodified and profited from in the world today, especially given an apparently infinite amount of “persuasive” power readily available at a moments notice. It’s GOOD to be the King!
Wall Street banksters get the benefits of QE, with the average person getting screwed. Banksters have the political power, with their puppet politicians writing sweetheart laws and cutting deals for them, and institutional power at the Fed, which they control. The banksters believe the populous is just to be taken advantage of. Banksters are stealing all the money and retiring filthy rich. This is the new normal.
If you regard decreasing the life expectancy of elders by cutting their pensions as a bug, and not a feature, then indeed QE seems to be A Bad Thing.
Nobody should have to live off usury but that’s part of the rat race the bankers have created for us.
Believe me, as a burgeoning 70-80 percenter (if I’m lucky) elder myself, I can EASILY imagine the day that elders might be exceedingly grateful for relief from the life we’re very soon gonna have in store.
Hey, if you’ve lived long enough to procreate and watch you’re progeny procreate as well, you’ve lived MORE than you ever had any right to expect anyway. First worlder’s have a distorted view of reality. Life as we view it is NOT as it naturally would be, had we not purposely left 90% of mankind behind in our lust to “get ahead,” and in the process provided for our own undoing as well. Nature/God is smart that way. No shortcuts silly humans.
We’re about to see all of this play out with a vengeance over the next few years.
Agree. The average Boomer is going to be crushed down the road. Only the quite well-off will manage OK. I rather expect there will be little sympathy for our plight, given how very badly we’ve buggered things up for everyone on the planet, capped by our absolute refusal to get old and out of the way.
But I do very much distinguish as to where the blame should be directed, i.e., it was not the typical Boomer, rather those in the elites who were supposed to pursue the public interest in their policies/programs, NOT those of the wealthy they very much wanted to join. Humanity’s most selfish generation ever has some serious ‘slplainin’ to do to those who will never be as comfortable coming behind.
Low interest rates don’t just affect those who are trying to retire, they also affect those saving for retirement.
Because of their central role in the financial crisis, house prices have been a popular topic in the past few years. All the the news article I have read on the subject assume that low interest rates prop up prices since they allow for much cheaper financing, lower mortgage payments and make houses more affordable.
However, as a 30yo who would like to one day be a homeowner, this is not the effect low interest rates have on my budget.
Low interest rates come with low returns on investments making it much more difficult to save for retirement (see http://xkcd.com/947/).
I decided to try to quantify the effects of low returns on my budget:
I : Annual Income
S: savings ratio
The amount saved each year of my working life is I x S
The amount spent each year of my working life is I x (1-S)
For example, if our household after tax income I=50k and we save 10k for retirement, S=0.20, we get to spend 40k that year.
We would like to maintain our standards of living after retirement which means we would like the amount we spend I x (1-S) to be equal the amount of our retirement pension payments. That is, if we save 20%, (spend 40k, save 10k) we would like to get a 40k pension at retirement.
The value of our savings at retirement should be enough to give us this annuity. To calculate S, the proportion of our income we should save to achieve this goal, I take:
Future Value of my savings FV(I x S) = Present Value (at retirement) of the pension annuity PV(I x (1-S))
Taking the formulas from here:
http://en.wikipedia.org/wiki/Time_value_of_money
I arrive at
S = 1/( x + 1 ) where
x=1/((1-1/(1+i)^m)/((1+i)^n – 1))
(See https://picasaweb.google.com/lh/photo/rdEbvkw5wx78_dnqZuL4QtMTjNZETYmyPJy0liipFm0?feat=directlink )
i is the real (above inflation) returns on my investments which, assuming I don’t take too much risk, should follow the trend of long term real interest rates.
n is number of years we are savings
m is number of years we plan to be retired.
Lets say, that I start saving for retirement at 30, retire at 60 and live to 80. That’s 30 years of savings and 30 years of being retired, a somewhat optimistic scenario (n = m = 30).
Here is the graph showing how much we should save relative to long term interest rates ( https://picasaweb.google.com/lh/photo/d4vj9i43MIPd8H7MqUq_BtMTjNZETYmyPJy0liipFm0?feat=directlink ).
If real returns on our investments were 0%, that is our portfolio just followed inflation, we (or a private/government pension plan acting on our behalf) would have to put aside 50% of our income for retirement. This makes sense, with a retirement equal in length to the savings years, and no returns, we split the money half and half before and after retirement to maintain spending levels.
If we managed to get 4% real returns, which is what most online savings calculators assume by default and about what the previous generation got, we would need to save 23% of our income to maintain standards of living at retirement.
If real returns were 3%, we would need to save 27% of our income, if they were 2%, we would need to save 35% and 1% would require saving 42%.
Real interest rates going down from 4% to 2%, increases the amount we need to save by 12% of our income and we have this much less money to put on housing and other things. For example, if our after tax household income was $50 000. We would need to save an additional $500 a month ($6000 a year).
However, a 30 years 4% $200 000 mortgage, has monthly payments of $954, while at 2% the payments are $739, savings of only $215.
If I bought the same house when returns and mortgage rates both went lower by 2%, I would need to find an additional $285 per month ($3420/year) to keep my retirement savings on schedule. If I decided to recoup this $285 per month by buying a less expensive house, at 2% interest, it would have to be a bit more than $75 000 cheaper.
I’m not sure If I am missing something here and why no one is talking about this.
I realize that expected returns and mortgage rates don’t necessarily move in sync and it may be that mortgage rates had bigger downward moves than expected returns on savings.
Sometimes I fear that my generation is going to be working into our seventies. House prices will need to go down further before we can afford them while saving for retirement.
Western countries cannot sustain consumption spending at 1990s or 2000s levels – they need core investment in the building blocks of wealth (energy , transport etc) which unfortunately is not happening as natural monopolies are now privately owned and outside state control – the fiduciary duty of these companies involves constant depreciation of assets until all wealth is dissipated.
Once the commons was privatised pension funds got some of that tempory surplus as wealth was run down but now that period seems to be at a end.
The UK is a energy / investment disaster zone – with dramatic depeletion of the North Sea & constant declines of its now limited Nuclear capacity.
The only growth in the UK is based on its 19th century investments – the railways.
That’s a hugely important point. In the US, privatizing didn’t go quite as far as in Britain, so we still have a basis for comparison.
Electric utilities were mostly privatized, but city water systems are still city-run. Since the privatizing and the Enron securitizing, electric systems have deteriorated badly and raised their rates. Water systems are still solid, with reasonably good maintenance, few leaks and reasonable rates.
Central banks have always favored lending institutions (investment & comercial banks) over pension funds and private savings. The balance of power between the two is not symetric
This point is being raised again and again. But how on earth is QE favoring these banks? Think about it. In the current environment banks and financial institutions are seeking out safe investments. But the yield on t-bills are down due to QE.
I think people have to start coming to terms with the simple fact that these problems are not due primarily to bankers. They are to do with how governments are directing policy. (I.e. refusing to engage in stimulus).
Point your guns in the right direction.
So bank market valuations, along with markets generally have been plowing upward since October on unprecedented “easing” by the ECB, DoJ, China, and others together with the Fed (already at ZIRP + “Twist” + ZIRP for another 2 years with overt inflation targeting, with more to come, but can’t yet “ease” because the US data look too good at this point – but for entirely different reasons) are all engaged in a policy that is against the interests of banks – is that correct?
We are besieged by, say you, policy cretins across the planet who are beating the crap out of their populations on a number of levels in order to NOT HELP the banks.
That’s a very interesting thesis
As longer and as harder we are trying to avoid the required write-offs on mal-Investments, the worse the situation for everyone but the Bankers will become.
Many people are innocent. They did not get “drunk” during the boom so why should they suffer the “hangover”?
Plus you neglect that so-called “credit-creation” cheats EVERYONE, including borrowers (by driving them into non-serviceable debt).
As for “malinvestments” many otherwise solid businesses went bust during the Great Depression and very many very employable people could not find work then.
It could be you have to choose between sharp, short term pain versus long-term debilitating health, where additional innocent parts of your body will suffer.
You ignore justice. Innocent victims don’t deserve any pain.
Creating more innocent victims is not justice.
Show me the additional victims!
The last Great Depression was a major cause of WW II which killed 50-86 million people. Wanna try for GD II and WW III?
If you are going there, I think I will stop here.
At least think of the innocent plants that would be killed?
Conservative “Progressives” are not a pretty sight. What good are they?
Well, perhaps it’s intuitively obvious to you, but I don’t see the intermediate 20 steps.
F. Beard, on October 15, 2010 at 8:42 am said:
Of course, it will never happen as long as most people buy into the fiction of benevolent government. Glen L
Please don’t think that bankers are any better in their hearts. And I am afraid that some degree of government is inevitable though it should be limited. But in any event, millions would currently starve to death without some form of forced redistribution by the government.
Their own fault you say? No because that is equivalent to claiming that there are no victims of the current banking and money system and that is absurd……
“”The government backed banking cartel is responsible for the Great Depression which is a major cause of WWII which killed 50-86 million people.””
Skippy… go read some history beard, wars are fought for only one reason, the control of resources. Capitalism dictates it, cheap, reliable resources, A to Z. All the rest, is just a sales job. You constantly buttress your arguments with absurdity and self evident claptrap.
PS. Oh yeah, you’ll read it when its free!
F. Beard, on October 15, 2010 at 8:28 am said:
Yes, I’ll check it out when I can read it for free.
F. Beard, on October 10, 2010 at 3:21 pm said:
It’s true, the ultimate backing of Greenbacks is the avoidance of government violence; I don’t deny it. However, I think the state will eventually “wither away” to a minimum once we learn to do capitalism correctly.
???once we learn to do capitalism correctly.???… beard.
Skippy here… Capitalism is a user pays system beard, yet you want a freebie? So many contradictions.
BTW the private sector is no shrinking violet when it comes to violence ie. Pinkertons, Xe, killer drugs, horrific health care, bankruptcy do to health costs, Monsanto, the endless 3rd world wars fought for company’s like united fruit (ongoing see Halliburton et al), etc, etc, etc. Our government is run at the behest of the private sector oh furry kitten avatar psy op… like one.
oh furry kitten avatar Skippy
That’s Oscar, a long lost pet of mine staring at a possum (raccoon? I fergit.) invading our back yard. Oscar was quite the brave little boy always getting that beautiful fur of his dirty and always hanging out with the bigger, tougher cats.
Anyway, I admire and love Oscar for his courage. Can’t you see it in the photo?
“But in any event, millions would currently starve to death without some form of forced redistribution by the government.”…. beard.
More absolutism with out evidence used to frighten, coerce, play at doom, to *validate a opinion*.
Skippy… did your parents force you to eat food you did not like or go to bed, anything? Force, force, force. The bible is force, the force of belief shoved in a kids head, before they have ability to understand the totality of it or all the other history that abounds our human past.
Your imbuing human emotions to an animal that you can not communicate with. In other words your making it up in your head, to fit your reality, for your reasons, not its.
Skippy… not a very sound footing for observing and measuring, rendering solutions to problem sets. BTW nice job of using fur ball to deflect every point I made ie. the private sector is the most violent actor… historically, government[s act on its behalf. IT should be the peoples government, not the private sectors or a reduction of it to empower it even more. 350ish billionaires in America alone, is that your idea of a society, a bunch of BSD running the show… eh?
Your imbuing human emotions to an animal that you can not communicate with. Skippy
You should really stop before you embarrass yourself further at this animal loving site.
Also, aren’t humans animals too? And do you think all communication is verbal?
A righteous man has regard for the life of his animal, but even the compassion of the wicked is cruel. Proverbs 12:10
I suggest you trade in your god for a more compassionate One.
There you go again, attempting to take the moral high ground.
Where did I say I did not like animals? I have two cats and two dogs, well looked after and loved. You assume much…eh.
BTW were a different species, whats your point?
Zero godhead need in my life, to much cheering for blood for my tastes. Evidence, almost every bar, restaurant, church, living room in America during the last 3 wars, my eyes and ears do not deceive me of the joy the bombs and death, brought, pride to a nation.
Skippy… back to the point of it all. The private sector is, historically, the motivator of all war, diminishment of the weak (sticky wages since the 70s), various industrial exposure illnesses (uncompensated shortening of life), child labor, destruction of environment affecting all life (I know you love your kitty, that makes up for it all), undue influence in the governing of the nation[s, putting its self – before – the well being of citizens, etc.
PS. your script has Babylonian and Egyptian influences, its an ad hoc patchwork foundation belief from antiquity. Ask Asherah and just because you believe, it does not validate it. Other wise you and pedophiles have something in common, you believe its ok.
Re: Saga are also right not to point their guns at Mervyn King and other central bankers; they’re doing the best they can given the circumstances in this regard. The real problem are the stubborn and intractable governments in the US and the UK who, despite having their own currency and hence extremely low interest rates, simply refuse to engage in real stimulus policies.
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Uh huh. The bankers and good, the governments are bad. Right, I see. Of course the governments are just naturally bad for some reason, it isn’t possible that they are bad because they are being lobbied and paid, and that essentially they are stooges. Oh no, the government is the dog, the bankers, The City, Wall St., they are just the tail.
Thats sounds a little more like it to me Jim.
Thata a convenient catch-22. “The Govt”, especially (but not exclusively) those who make laws and enforce regulations, are completely captive to the self interested capitalist cartel who see to it that thier will is enforced in most matters. Naturally, they seek to protect thier own interests. Since thier interests are opposed to the interests of the Majority of us, the people are displeased. The capitalist cartel then exloits that displeasure, to use as a political cudgel against any govt official they wish, ensuring that their interests are served at the expense of the greater good, creating more haterd toward the govt they control, and so on and on and on.
Perhaps the pensioners should think about this the next time they vote for politicians who promise austerity for everyone but *them*. I see QE as a crappy idea being enacted by the only (marginally) responsible adults in the room – yes, fiscal stimulus *would* work better, but the VSPs are busy waiting for the mythical “expansionary austerity” to start working.
Or perhaps pension age should be set where it makes sense, at 75.
what is it about 75 that “makes sense” ? Makes “sense” to who?
the incentive, it seems, is not to retire……..thats a nice gambit…
Total Uk debt is about 490% of gdp give or take….the cost of servicing that debt would undoubtedly be higher if it werent for QE coupled with low interest rates(no shit sherlock)…….so sorry Phil/saga/etc but until that mountain is as at a more manageable level the best course is going to be to keep the cost across all maturity spectrums as low as possible.Having reaped the majority of the post world war 2 peace dividend during their working lives Im sure todays impending retirees wont mind a touch of frugality. Plus those Saga holidays to Greece will be cheaper by half pretty soon….
ZIRP makes debt repayment easier. But that isn’t the stated aim of the policy. The stated aim is to increase effective demand.
So, the question would be: does easing the burden of indebtedness increase effective demand? For that you have to look at propensities to consume among highly leveraged people versus people that might have higher income if interest rates weren’t so low.
I don’t think that this is increasing effective demand. I think that highly leveraged people are often default cases waiting to happen anyway. They probably have an exceptionally low propensity to consume. While ‘savers’ and pensioners probably have a lot higher propensity to consume.
Besides, with all the positive spin out there, the negatives have to be looked at. The rarely are.
Developed country’s have over consumed for decades. The out put of that activity diminishes the long term living conditions of the surrounding environment. Isn’t that the main reason for off shoring, export it (Larry). But energy funding, sector imbalances and whoops bad math (derivative finance) blew up in their face?
Skippy… what if people have realized, just dawning on them, the futility of the last 20 years. I’m see a lot of it around my neck of the woods, whats the point of killing your self over it all.
Harder better faster.
http://www.youtube.com/watch?v=gAjR4_CbPpQ
Could be….I think thats an open ended debate….what is known is that the average pension savings of those aged 50-64 is about 90k….call it 100k for fun and assume an extra 3 % of interest and that additional 3k is good for a couple of weeks vacation per year probably overseas .Discretionary spending is the first to go and thats hardly likley to spur demand locally.Retirees can also quickly cash out of their houses and move somewhere cheaper and how much of the 10 or so % REAL house price appreciation since 2007(yes I know its uneven nationally) is attibutable to lower mortgage servicing costs?The point is, as with all the current debates from this one all the way through to austerity vs stimulus and greek default vs bailouts is that nobody really has a clue what the best option is. It really is like communism vs capitalism back at day 1 when both sides were vehemently defended. I guess we will find out in about 50 years who was right……
Too many presumptions. Too static a view of consumption behavior. Don’t buy it.
All we can say for sure is that 3k — your estimate — is taken out of the pockets of consumers who almost certainly make decisions based on income ‘at the margin’. Anything beyond that is just fiction.
As for best options, I think we have sufficient historical evidence to make a good call on this.
“I don’t think that this is increasing effective demand. I think that highly leveraged people are often default cases waiting to happen anyway. They probably have an exceptionally low propensity to consume. While ‘savers’ and pensioners probably have a lot higher propensity to consume…”
And you say I have too many presumptions????I wont even bother to copy the ‘ presumptions’ in your next post.As for historical evidence you haven’t presented any, and lets face it Saga is in the business of selling holidays and annuities etc to seniors.Using them to frame a debate about the relative merits of ZIRP is like using a crack addict as a frontman for LATAM coca production. Dont blame them but its a flimsy one sided argument supported by a lot of …..presumptions.
Okay… This is starting to smell like an an internet argument, I’m outty…
Yeah those arguments that can be instantly fact checked are a real bummer.
Not an argument in the slightest….just pointing out that the presumptions are on both sides.
In the midst of the greatest global bout of “easing” ever, (but for late 2008/2009) a round that has driven markets, and in particular the value of banks at a critical juncture for them, far, far higher since the fall lows, we are informed this is in fact something banks did NOT want to occur. It was rather the fortuitous, accidental side effect of the steadfast but misguided moves by CB policymakers who, as we now know beyond doubt, are working ONLY for the benefit of the public interest, focused with laser precision on generating real economic benefit for the common man by stealing savings from those dependent on savings, inflating prices for the least able to pay, and bailing out those with the most liability – which happen to be banks, governments which long ago ditched the notion that public spending was intended to serve the public interest, and the well-off in general. All an unfortunate mistake.
That ongoing ZIRP and “easing” was destructive, not helpful, for the majorities of people everywhere has been argued from the start by many analysts more associated with the “right” (loosely speaking) or of a libertarian/Austrian bent, rather than, say, a Krugman “liberal”. On the whole a more hard-money crowd, but certainly not all of that hue. I’m very left. But they were very correct.
The Fed is not about to “ease” according to coverage of the latest minutes. PIMCO and others have been at them re the damage taken by bond funds (and pensions and insurance companies). But AS WITH BANKS, it is at least as important a thing for PIMCO to know in advance that the Fed has chosen direction “x” as it is the particulars of “x” itself. A simple courtesy amongst the Truly Big Players, of course.
The arguments for why the Fed chose not to “ease” now include:
1) Far better to keep that card available should things in Europe go badly. Or for an Iranian crisis, perhaps. Or quite possibly both – I note a general lack of curiosity that Feb-May has been identified by a million “analysts” as the critical frame for both. Nothing like a crisis to clear any bank-owned Government Dumbness Obstructions to good, people-oriented policy, if something terrible should occur, right?
2) The most mortgage-fiasco vulnerable US banks (BoA, Wells, Citi, JPM) just received another colossal gift via the mortgage “settlement” (whatever tweaking remains to be done), have unloaded uber-trillions on the FDIC (BoA in particular)and are set to partake in the pillage of a good chunk of Europe.
3) Some of the quick and dirty ways for US banks to exploit “easing” have been curtailed. While banks don’t have as much love as they previously did for easing as generator of phantom paper profit, they’ll line up at the Fed at midnight at the first hint they need to tell the Fed not to help them by “easing”.
4) US data (who believes it anyway?) but more importantly, the perception of that data, is just not bad enough (remember, people are first and foremost in Wall Street’s mind) to warrant another “easing” policy accident just now. But to be clear, I put the odds that Bernanke will sit on his hands if Obama’s re-election is at all threatened at very nearly zero.
The goal of the Fed/BoE all along was to force a global currency devaluation irrespective of who got clobbered in order to ignite inflation while feeding banks bogus ramped “earnings”. I’ve believed it crazy from the start, not least because its effect in many countries/regions is to greatly exacerbate already-trying circumstances, and is tantamount to financial skewering for a great many poor countries and financial war for others, with Europe the scene of the worst fighting – Japan and China, left with no choice are responding in kind. All of this increases instability and destroys the necessary international political (as opposed to multinational corporate) basis for real solutions. But even if the damage was contained to within the CB’s home country only (say the US) what to make of the best and brightest when the “good scenario” requires another idiot asset bubble to “work” at all, and the “bad scenario” is “I’m doing fine. You pathetic 75% of people can fuck off”
I do believe I smell a little scare coming. Nothing to do with the banksters’ next meal of course.