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Absolute Return Partners Discusses The Economy, The Market, And The Retirement Lottery
Absolute Return Partners March 2010 Letter: The Retirement Lottery
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Damn Tyler, you beat me to it. Great read!
Did Oxburgh Partners calculate their numbers including off balance sheet and unfunded liabilities? I have a hard time believing that 3 or even 5% GDP growth (a skittle shitting unicorn imo, in the absence of QE to the moon) would begin to fund the Boomer obligations and reduce debt ratios.
What "deficit hawks" really need to understand is that the neo-Keynesians will justify Government deficit spending until the bitter end. Then they will blame it on someone else. This is why Cloward-Piven types love the modern incarnation of Keynes.
If the boomers think that's a shitty place to be, how about the generation that is graduating as we speak with little or no prospect for a job, and who, though lack of losing one, don't appear on the unemployment numbers.
A pile of debt (now seized by the gov't along with hundreds of billions in other student loans, and serviced by government contracted idiots), no savings, and a $10/job... This is the kind of shit that impels people to burn it all down and turn everything into Detroit.
And I don't mean the relatively rosy Robocop kind of Detroit, I mean the real Detroit. Like this: http://www.time.com/time/photogallery/0,29307,1882089_1850973,00.html
You wonder, at what point did the citizens of Rome notice that they'd lost 90% of their population, and that there were trees growing through the ruins of their great buildings?
Now I'm depressed. THANKS FOR RUINING MY WEEKEND ZH!!!
The only beneficiaries of a continued and continuing inflation are the banks. Why is deflation (I'm not, necessarily, saying depression) considered to be so bad?
The US, between the early 1800s and 1900, had overall slight deflation, even considering the Civil War and yet this didn't stop development or growth in the US. And it meant that peoples' wealth was being maintained instead of (since the Fed was set up in 1913) reducing the value of the dollar by 90-odd percent.
Time for economy to breathe out for a while instead of sucking as much (hot) air in as it can?
DavidC
There is no rule that says asset prices have to or will increase perpetually. We've all been acting for 50 years or so like that is a law of nature or a civil right. It a'int.
It more or less follows that if you can't earn and/or build your way to financial independence by the end of your useful working life(and most of us won't or can't for one reason or another) there has to be some sort of socialized support system in place. If the government runs that socialized support system (Social Security) then they are also faced with the problem stated in the first sentence or demographic problems that arise or both. Right now we have both.
From the dawn of man up until Bismarck or FDR, depending on how you want to slice it, the default social support system was the family. You may not want to share a roof with your mother-in-law but apples to apples it's the most cost effective way to "retire" - plus the younger family members can still squeeze some marginal productivity (child care etc.) out of the oldsters without any messy paperwork, payments or taxes involved. That's called efficiency and also happens to not be a word commonly associated with government programs.
Obviously not everyone will have enough of a family to fall back on and that's what (will be left of) Social Security should be used for. The rest of us should be able to take an incentive package from the government in the form of property, estate and other tax breaks if a blood relative senior citizen forfeits Social Security in favor of family care.
It's the only sane way out of this inevitable disaster and as problematic as some family relationships are, relying on the government for your long term welfare is not a bet I'd be willing to take.
I run into one problem with this accounting identity argument, yes if the government spends more then the public can save more (Which ends up in treasuries and financing imports) the problem arises is that this increases leverage in the system and deleveraging never occurs, so I do not believe deficit spending is the answer.
Which leads me to a conclusion that forcing perpetual surplus countries to increase the value of their currency is really the only option.
My policy concoction though would be massive QE combined with fiscal discipline (since I believe the gov. is never a great allocator of capital). This would delever the government and decrease interest payments which would eventually allow the gov to spend more/tax less helping the private sector delever. This may also depreciate the currency and put pressure on overvalued currencies.
In essence complaining that the fairy land, debt driven, immediate gratification consumer spending levels of the the past 20 years is not going to be duplicated. This is not shocking -- what did you expect?
Of course, the 20 years following a massive 20 year party are going to be sub-par.
Everyone complaining now borrowed too much, buys new cars (and does not own them for 10+ years), lives in a house that is too big, goes out to eat regularly, has cable TV, a cell phone, a pet, goes to the movies, never saved, etc, etc. Now they are paying for their lack of discipline.
Could have bought 30 year US Treasuries in 1980, 1990 or 2000 and done just fine, so can't say the equities your parents enjoyed were the once in a lifetime opportunity. And there are ways to make money in a sideways or declining market, so start living way below your means (SAVE) and figure out how to make money. We do not need more folks in the entitled victim class.
So, looking at chart 6, what happens if the government balance is taken back to zero (=no deficit) ?
Does it drive out foreign capital? Does it not permit increased private savings?
Something doesn't make sense.
A EURO rally may be around the corner.
http://www.zerohedge.com/forum/market-outlook-0
Eat, drink and be merry; for tomorrow ?
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