A Death Blow to Europe's Welfare State?

Leo Kolivakis's picture

Please read my latest and post your comments here:


Thank you,

Leo Kolivakis

***HT: Tyler

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Kayman's picture

All pensions in all countries are unfundable- working for a living fell out of vogue, while scheming and propagandizing grew like cancer.

Would the last working person in the private sector please turn out the lights ?

Ropingdown's picture

In our vacation house at the beach in Spain, I like my neighbors. Very diverse group.  One is an IT director for a large regional bank.  We had a long discussion about US v. Spanish culture.  As he put it "you have to understand. Americans don't expect their government to provide for them. In Spain we expect the government to provide us with many things."  Simple.  Honest.  God forbid we encourage that outlook in the U.S.  There is virtually no limit to the expense Physicians can create simply by adopting new medical devices and technologies.  Ditto pharma.  Think about it.

caconhma's picture

Following the WWII, both EU and the USA greatly benefited from the post-WWII colonial system when EU and the USA greatly exploited their military might, technological/industrial overwhelming superiority, and reserve currencies status to successfully use the rest of the world as their close to free supplier of row materials, manufacturing products,  and cheap immigrants labor.

For a long time,  the Soviet Union was aggressively trying to destroy this colonial system but, at the same time, its socialist structure greatly undermined its own economy creating overwhelming dependency on international food supplies. Furthermore, Soviet leaders preferred a status quo since they were not capable of using an old Stalinist coercion or changing their dogmatic vision of socialism. 

As of now, the old colonial structure is coming down very fast:

- China, India, Brazil, etc., are determined to develop a more balanced relationship with the West (no free goodies anymore)

- Overwhelming US militarily superiority has shown its major limitations in Vietnam, Iraq and Afghanistan. Furthermore, the West is rapidly losing its industrial base and associate industrial technological superiority. This  severely undermines US military technological superiority and leads to the USA inability to procure high-tech complex and expensive weaponry.

The bottom line: the West must become competitive with China, Japan, India, etc. It cannot any longer use coercion. The fiat reserved currencies benefits are also will disappear in a near future.

exportbank's picture

Leo...Why do the FED and Bank of Canada have a "target" inflation rate? Why can't they target ZERO inflation and ZERO deficits - as a family we target (and achieve) a zero deficit  why can't governments do that?

dumpster's picture

on his blog but you have to be "approved


clarify whos blog  .. thanks

mchawe's picture

I tried to comment on his blog but you have to be "approved". A waste of time !

If you rely on a handout from any government, you are still a child !

Panafrican Funktron Robot's picture

Personally, I think all this talk of blaming the pensioners themselves is yet another obfuscation in a long line of obfuscations.  The sheep follow the shephard.  And who does the shephard follow?  Work your way up the chain folks, it all points to the same damn place.

BumpSkool's picture

+100 Jimmy. At least someone knows what the hell they're talking about. I wonder if that's how he got so rich trading Gold!

dumpster's picture

sold a gold mine sutton  for 200 million .

been in finance stock markets for 50 years

other stuff on the way

called for 900 gold in 75 sold for 870 1980

called for 1650 gold when gold was 300.

family  was the founder of nasdex

family traded gold during the calfornia gold rush .

owner of several international trading houses

then theirs  leo lol .. his view . no gold






cognitis's picture

Sinclair's widely-known as a fraudster. This fraudster's small churn-and-burn futures brokerage was dissolved when fraudster couldn't pay a small CFTC fine.

dumpster's picture

p.s. pile of excritment passing on rumors . and two bit information

give sinclair a CALL on his TRE WEB SITE  HE wILL ANSWER "SINCLAIR"  just  ask him .


pesonally what happened


but your off handed remarks are the domain of the twisted simple mined low lifes . that slime around in the greasy corners of your own mind..

with the most accomplished is to have  squirmed in and out of low level acts of disperation .. from job to job in a rotation that even  smacks of reporting on a web site your fascination with the lowest in your own self

dumpster's picture

your so full  of it ,,, that your reply turned green


you do not know what you are talking about and have green eggs for breakfast.

at least have a clue ,, it sucks to be you


especially trying to spout spit ,

who feeds you this shit  , some small minded person looking in the mirror no doubt

jump over all the accomplishment ,, look your self again in the mirror and see a poor imitation of a self described bottom feeder

widely known as an expert on gold , advice sought from many top nations on gold.  .. sought out by volker to be the person to unwind the hunt silver position and a loan of a billion dollars.

financing the use of a free gold web site .  with some of the top names of investing , financing a new gold start up ,  interviewed by king .. sought for by top publications, family history that reads like a whos who in stock market lore,, started at 16 on his own in the finance world .

makes people like your small minded self a topic for the trailer trash crowd , who live off tainted meat, and stolen cans of spam

 what ever you know about sinclair was picked up off some you did he did site , as you swept the floor of some speak easy


and you have the disgusting privilege to pour sand in your mouth ..

augmister's picture

You retire when you die.  Anymore questions?

dumpster's picture

leo  sinclair

sinclair  lol


Jim Sinclair’s Commentary

We are in a major leg in gold that will take us to $1650 and above.

The Gold Council (mouthpiece and transparent beard spokesman for the majors) still needs to learn that gold is money, not jewellery, and has the price potential of multi thousand dollars per ounce.

Speculators Grab Gold Faster Than Mines Can Produce It

Double down's picture

I have never had the entitlement to received a pension other than the Canadian old age version.  I will probably never receive one and my SAVINGS will have to do. 

I was never hired by a company who offered them, was strung along as a as contractor for years in their offices.  I too have a family. 

So I have no sympathy for those those who are about to lose theirs.

Where are your stock options now?

Welcome to the real world.



Vendetta's picture

same here.  When I've worked as a 'permanent' with an employer, pay is simply adequate, when as a contractor, somewhat higher than adequate.  But as perm in private sector...mega hours and huge responsibilities...after which they dispose of workers when it is convenient.

I know a lot of government employees (state)... 99% have no clue of the real world that the government they worked for for so many years has done to workers in the private sector...now it is their time to pay for it with pain... and lots of it.  Private sector workers have been experiencing it for quite some time.

Henry Chinaski's picture

my SAVINGS will have to do

Ding! Ding! We have a winner!

That graph is ridiculous since it doesn't reflect who will be retiring on savings.

Rogerwilco's picture

Maybe they'll try the Kolyfonia solution proposed for their CalPERS woes -- a "one time", 15% universal property tax levied on "the rich". It's so egalitarian, it will pass any democratic ballot test, and if you backstop it with a draconian exit tax, the evil-rich will pay, pay, pay!

Carl Spackler's picture

Of course, the prices of real property are so high in California that everybody who owns any land will be defined as "rich" and so the middle class will again carry the burden, and the illegals will pay nothing.

Here's a better idea, California...cut spending now, and stop living beyond your means. 


TBT or not TBT's picture

The NYT graphic looks dubious to me in that the United States is shown as being in exactly the same boat as Germany or France or Italy by 2030.   Germany and Italy have far lower birth rates than the US now, and they've had lower birth rates than those in the US for decades.    Demographics is a game of who is going to be there on the ground 20 or 30 years from now.  

This particular graphic guesstimating how many workers there will be per retired person is much more easily gamed in the present because you can throw in variables that are subject to shorter term changes, such as retirement ages, present economic conditions, and so forth.   The United States can pull out of this curve, but Italy and Germany cannot.   Their birth rates are so low as to be irrecoverable, "lowest low" rates in demographers' terms.   They will not recover their civilisation in any form that is recognizably German or Italian.

Still, if one point of the NYT article is that European style nanny state pensions and welfare are going to be unnaffordable for the United States, well, duh.   I'd go further and point out the nanny state is what gave them their irrecoverably low birth rates to begin with.  Try raising a family of any size to western standards of quality of life in one of Europe's tiny little apartments, stacked among so many others in their absurdly compact cities, on such meager take-home pay, with such small cars, etc.   For all the money the European governments give to families for having a kid, Europe is still anti-family.    That can't be a surprise, as the statist views the family as a competitor in all of the rolls they would like to see the state take over, starting with education.  They've managed to nationalise a lot of what families instinctively do, except producing the next generation.  Somehow the state managed to take the will to do that which is most primally instinctive right out of them.

puckles's picture

"Try raising a family of any size to western standards of quality of life in one of Europe's tiny little apartments, stacked among so many others in their absurdly compact cities, on such meager take-home pay, with such small cars, etc.   For all the money the European governments give to families for having a kid, Europe is still anti-family.    That can't be a surprise..."

Try doing something similar in Japan.  I lived there with my family for a year on 2006-2007.  We had a typical Tokyo "family" apartment, which was 60m2.  This included an entry alcove (obligatory, for shoe removal and storage), combined kitchen/living/so-called dining, a single toilet/bath/shower area, and two closet-sized bedrooms, one of which fit a double bed, and the other, a twin (we bought a bunk bed for it).  Unlike Europe, Japan has almost no open spaces, although our tiny community did have a rare open tiny square, which was used for festivals, crafts shows, antique shows, and the like.  But there is virtually nothing outside dedicated to kids, and there is almost no day-care system whatsoever, aside from the proverbial Grandma.  No wonder educated Japanese women want no children...and, remember, in Japan, a 40-hour week is part-time.  To be considered a serious contender, at least double that is required...They can escape for work or educational purposes, but the face time requirement is still extreme.

Hulk's picture

Interesting two stories puckles. Easy to see why Japan has a serious negative population growth rate. I have watched japanese interviews about this and essentially life is miserable over there and the men are always drunk at night...I wouldn't have kids under those conditions either...

kaiten's picture

"...The United States can pull out of this curve...."

Absolutely. High fertility-rates of mexican masses easily offset bellow replacement level fertility-rates of american whites. As a consequence, we may be wondering of course, which country will be more unrecognizable few decades down the road. Italy and Germany on one hand, or U.S.Amexicana on the other.


THE DORK OF CORK's picture

Give us a global reserve currency and we will live in ranches by the million until we wake up in the morning and realize we can't afford to drive to work.

THE DORK OF CORK's picture

I see nothing wrong with reducing consumption via lower wages or benefits.

But the deeper question is where do the savings go - my view is that under the present monetary and economic model the savings will go to bondholders who also consume.

This will not do anything substantial in a world of energy austerity - unless the surplus created is transferred to vehicles that develop non-fossil fuel energy the process will be a waste of time and effort.

AnAnonymous's picture

It will achieve giving more to bonholders in a world of declining capability to consume.

Probably the sought effect. Some will have to tighten the belt so others can loosen it or at least not tighten it.

Sudden Debt's picture

As a European I must respond to this.

The system as is doesn't work any longuer. And in the comming months there is indeed a change comming. There will be a shift in the pension and unemployment system ass is.

1. Pension system:

goverment employees : No longuer will they get 125% of the wages when they worked. This will go down to 80%

Privat working employees: They will get also 80% from their former wages, this is up from 65% for most.

BUT: Some people who make less then 2500 euro brut will receive less pensions, the ones above that more. This was always caped to a max. of 1450 euro netto. Now this is without ceiling. The more you made, the more you'll receive but it also work the other way arround. (mayor savings here)

The same will go for the wellfare system and unemployment benefits.

But for unemployment benefits there will also be a time max put onto it. You get full wages by the state for 6 months, after that it goes down.

For people who are unemployed more then 12 months, they will go to absolute minimum. (mayor wages)


The reason for it: Some people who earn the minimum wage when they work, work for 6 months, get themselves fired and get about 97% of their salary for the next 4 years. After that they look for a job and keep it again for 6 months and so on and so on.


This will create a much poorer lower class, but everybody else, me included finds this very normal.

In my country this system will start starting 2011.

RockyRacoon's picture

Interesting comments there.  A couple of questions:

Do you consider Europe to have a "culture" as some of the other comments above indicate?  How long would it take to reverse the "cultural trend"?  Will there be more of the social unrest by the populace like there has been in Greece?  What parts of the population would be more prone to cause civil unrest? 

Thanks for your comments from the war zone.

ZackAttack's picture

That chart brings it home. It completely blows me away how a secular demographic shift has been misdiagnosed and mistreated as an issue of liquidity and confidence.

It's not like it should've been a surprise to anyone.

Apostate's picture

Something many people forget is that American corporations externalize costs as much as possible onto the Federal government and various municipalities.

The bond market and the equity market are linked in more ways than can really be understood.

"The decline of the west is simply due to a partial loss of control and depletion of energy resources - if the number of workers were the key to prosperity global corporations would again be very active in the slave trade."

It's more complex than that.

Also, the slave trade is still thriving for prostitutes in the United States. When you make prostitution illegal, it goes underground.

THE DORK OF CORK's picture

Perhaps it was a simplification to get my point across - for example the wage arbitrage model pursued by corporations is a form of slave trade.

They relocate to Asia -pay less wages - make bigger profits - feed western consumer credit to consume these products - make bigger profits.

essentially win on two fronts -and indeed stock holders until recently benefited enormously from this trade

this strategy makes sense for a individual cooperation or smaller niche country but not for a large country such as the USA or a trading bloc such as the EU.

Why - the energy lost from such transactions via transport costs does nothing to feed global consumption and is just lost somewhere in the middle of the Pacific.

As you say corporations have been externalising costs -  chiefly via higher debt costs in the west and greater pollution in the east but these costs have nearly completed a full circle and are now making their presence felt.

Vix_Noob's picture

 the slave trade is still thriving for prostitutes in the United States.


Exhibit A:  Congress.

Apostate's picture

In my (unprovable) opinion, offshoring and outsourcing is more an effect of the tax code and the political environment than anything else.

In the US, manufacturing isn't labor intensive and it's becoming even less labor intensive. You can make more money in real dollar terms by taking advantage of the banking system than by actually running a real business.

Real businesses are complicated. You have to manage people, develop new technologies, deal with political complications, and what have you.

It's a helluvalot easier to just run a robotrading operation. Or a hedge fund that never makes or loses that much money.

Manufacturing can return to the US to a greater extent, but it will likely look quite different from the kind practiced in modern Asia or in previous generations.

The technology for highly efficient, decentralized, and largely automated manufacturing already exists. But it will never be a provider for mass labor.

There's a lot of stuff that could be done in the US if you get rid of the bureaucracy. For example, it would be trivial to raise funds to replace the decaying plumbing systems in cities around the country, but it would just take too long to work through the politics.

puckles's picture

I agree with you entirely, Apostate.  In my former life, I ran a chemical manufacturing and wholesaling operation, split between the NYC area and Chicago.  Asia had already run our company out of the dyestuffs business in the seventies--far lousier quality, but far cheaper as well. They began to hit so-called food grade items in the eighties; I will never forget the first drum of Chinese citric acid I opened, supposedly food grade.  It was full of dead flies.

The Chinese eventually took over all of the basics and intermediates because they had no regulation whatsoever, paid slave wages, and with that in their favor (plus the vaunted "most favored nation status"--hah!), they killed our far more skilled industry.  They worked through distributors who were willing to favor them--and, of course, cheap prices--while killing real FDC grade material made locally, with local employees.

It took me around 15 years to call it a day, and that was precipitated primarily by the death of a major shareholder (Note to IRS: yes, the estate tax really does kill smaller companies and the jobs they represent--we were 17 people in two states, with annual revenue of ca. $25 M in 1998, not our best year).  Our company had been in existence for 138 years, and had sold naval stores to the U.S. Government during the Civil War.

For me, the most ironic aspect of all of this is that I now work for the same entity that drove a stake in the heart of my business, in favor of Asian nameless entities that do not even pay US taxes.  A further irony is that in the event of a real war, we are now beholden to those same Asian nameless entities to provide our primary chemical stocks, and guess who they are more likely to be aligned with?

thisandthat's picture

"Real businesses are complicated. You have to manage people, develop new technologies, deal with political complications, and what have you."

Meaning, you can't just fake it ;)

Missing_Link's picture

It's a helluvalot easier to just run a robotrading operation. Or a hedge fund that never makes or loses that much money.

So true.

THE DORK OF CORK's picture

You can have the technology but it is of little use unless you have cheap energy to drive it.

If this crisis is as big as I think it is - you will have mass steel production and even textiles coming back to America within a generation.

These are not sexy Industries but are just as vital today as yesteryear.

The  density of employment will be inversely proportional to the energy density

Apostate's picture

I'm quite familiar with the argument, Cork. In a previous life, I used to be an EROEI nerd, and I've done some analysis for small energy services providers.

Globalization is an effect of central banking and politics. It has nothing to do with economic fundamentals. There's nothing about Chinese ground that makes it a superior place to build a factory.

Dirt is dirt. People are people. 

Vendetta's picture

and the people in china are dirt cheap

faustian bargain's picture

And the politicians and central bankers wanted it that way.

Kayman's picture

Now, now, my friends

Let us correct the denominator in this ratio.  Eliminate government workers from the denominator and try to carry the load ( the sum of pensioners and government workers) over the shrinking private sector.  

Then reduce the denominator further by eliminating the Parasitic Class (say, New York and London Casino operators).

Now, that is what the real problem is. And that is why the economy can never come back.

P.S. Leo- what's Canada going to do when the Chicoms stop buying resources ?

THE DORK OF CORK's picture

Surely it is the productivity times the number of workers that is important.

If numbers of workers relative to dependents were that important Bangladesh would be a Superpower.

The decline of the west is simply due to a partial loss of control and depletion of energy resources - if the number of workers were the key to prosperity global corporations would again be very active in the slave trade.

hbjork1's picture


By what measure do you say that the west has declined. 

I will be 75  in August and so am old enough to have know well the lifestyle of the people living before WWII.  Imagine a world before land line telephones or perhaps 4 or 5 land lines per 1,000 people.  Imagine the work involved in turning the soil to plant with your trusty horse or horses that had to be fed and harnessed for plowing.  Imagine a world where people traveled on horseback frequently because there were few cars.  Imagine traveling in a car over dirt roads that were muddy in winter and dusty in summer.

Imagine a world in which polio was a real threat, malaria was a danger in some locals, tb (that my grandmother died of at 28 as well as a neighbor at 52) could not be readily treated.  Stomach ulcers were thought to be caused by stress and so on. 

Life today is very good.  The problem is that we, the public,  have been conditioned by availability and the boob tube to want more. And, perhaps what is more important, conditioned to depricate the value of our own efforts properly applied.

Too often, what appears to be the easy route isn't.



THE DORK OF CORK's picture


I never said we will run out of energy/food tomorrow - if we want to continue the expansion of energy supply we will have to reduce personal consumption and increase capital spending which will reduce demand for some time as a Fission plant typically takes 10 Years or so to come on line.

Banks which are a mirror image of the real economy cannot survive in their current form as there capital requirements are too low and as they increase capital the real consumption economy will shrink.

Using GDP as a measure is extremely flawed as it is really only a consumption index in both the personnel and capital building Phase.

It is not a inventory of capital.

The great flaw in our accounting is that oil burned that took many millions of years to form is not really counted as capital.

The only metric is consumption of BTUs which is tracked via GDP etc.

If you burned oil but at the same time invested in technology such as nuclear that can overtake the consumption rate of below ground fossil fuels that would be fine but we do not live in such a world.

If you cast your mind back to the late 60s there was very ambitious plans for fission plants but these were scrapped during the first oil crisis and the rise of monetarism - it was easier to burn oil, reduce capital expenditure and give a temporary rise in consumption levels as this capital was freed up.

Now that power plants are aging and it takes more energy to extract a barrel of oil the piper must be paid.  


The west has declined as the old Protestant values of building capital and saving for some future time have been usurped for instant gratification - we appear to have crossed the Rubicon some time in the 60s when all that cheap Saudi Arabian oil fooled the youth of the time into thinking you could get something for nothing.

Even if people want to save now they cannot as their savings will be put through the consumption sausage maker wether they like it or not.

We are all Catholics now baby.

Kayman's picture

Hey Dork

I keep feeling that you are the reincarnation of Thomas Malthus.  We will no more run out of energy than we will run out of food.

Energy cost has continued to fall as a portion of GDP since oil was first tapped. 

Just as coal and whale blubber were elbowed out by oil, oil will gradually diminish in its importance.

The only thing oil has going for it, is its portability, but that too, is changing.

Let's keep this planet clean, but let's not fall back to the dark ages.

Popo's picture

Yes, that's true -- but since the productivity per worker has not changed significantly over the past 20 years, the decrease in the worker/retiree ratio is significant.

whatsinaname's picture

There goes Leo again - posting articles that contradict his trading philosophy.

RagnarDanneskjold's picture

The problem isn't the culture in Europe or the U.S., it's the reliance on government and corporations. Government is far worse, since it saps the whole economy and cannot fail, except catastrophically, but individual businesses fail catastrophically all the time, mostly those that follow the government formula for pension benefits (steel, airlines, autos, etc.) but not exclusively.

I do not understand why the change was made from pensions to 401(k). It went from total business control to almost total individual control. What makes the most sense, to me, is to have the individual own their pension and have forced contributions, but the company contributes and the investor or company can choose an institution to manage the account. Basically break the ownership from the company, but maintain the management. The role for government would be to set a minimum retirement standard, i.e. Social Security, and top off accounts that fail to achieve the minimum.