Bill Gross Warns Of Demographic Doomsday
"It’s a wonderful life for the 1% and a Xanax existence for the 99," Bill Gross says, bemoaning the pacification of the masses that the (former) bond king likens to "a day at the Coliseum" for Plebian citizens and "cake" for the French Bourgeoisie.
But while the myriad creature comforts available to a society that's more interested in "Fantasy Sports, cellphone game apps, sexting, and fast food" than it is with the fact that "half of the U.S. population doesn’t go to work in the morning [or] that real wages after conservatively calculated inflation have barely budged since the mid 1980’s," may serve to keep the populace in a state of perpetual stupor thus forestalling an inevitable revolt by both the proletariat and the elite, demographic realities are set to make the "next few decades" difficult - even for an American electorate drunk on Xanax.
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"It's A Xanax World," by Bill Gross
The Romans gave their Plebian citizens a day at the Coliseum, and the French royalty gave the Bourgeoisie a piece of figurative “cake”, so it may be true to form that in the still prosperous developed economies of 2016, we provide Fantasy Sports, cellphone game apps, sexting, and fast food to appease the masses. Keep them occupied and distracted at all costs before they recognize that half of the U.S. population doesn’t go to work in the morning and that their real wages after conservatively calculated inflation have barely budged since the mid 1980’s. Confuse them with demagogic and religious oriented political candidates to believe that tomorrow will be a better day and hope that Ferguson, Missouri and its lookalikes will fade to the second page or whatever it’s called these days in new-age media.
Meanwhile, manipulate prices of interest rates and stocks to benefit corporations and the wealthy while they feast on exorbitantly priced gluten-free pasta and range-free chicken at Whole Foods, or if even more fortunate, pursue high rise New York condos and private jets at Teterboro. It’s a wonderful life for the 1% and a Xanax existence for the 99. But who’s looking – or counting – even at the ballot box. November 2016 will not change a thing – 8 years of Hillary or 8 years of a non-Hillary. Same difference. Central bankers, Superpacs, and K street lobbyists are in control. Instead of cake, the 49.5% (males) will just have to chomp on their Carl’s Jr. hamburger and dream of a night with 23-year-old Kate Upton lookalikes that show them how to eat it during Super Bowl commercials. And if that’s too sexist, then Carl’s is substituting six-pack hunks instead of full-breasted models to appease the other 49.5% (females). It’s a Xanax society. We love it.
But I kid my readers – (that’s what comedians say on TV when they approach an edge). Kidding aside, however, if the 99 think they’ve got it good (bad) now, just wait 10 or 20 more years until their bills really come due. Of course by then, the 1% likely won’t be doing so well either, but there’s the hope that each and every one of them (us/me) can sell before the deluge. I speak specifically though to liabilities associated with the Boomer generation: healthcare, private pensions, Social Security and the unestimable costs of global warming, but let me leave the warming of the planet out of it for now. Let me try to convince you with some hard, cold facts, many of which are U.S. oriented but which apply as well to much of the developed world, because we’re mostly all getting older together. Demography rules.
Explaining this demographic countdown requires an impolitic concession that the world’s population is gradually aging, some at a faster rate than others (Japan, Italy, Taiwan!) but mostly in developed vs. undeveloped countries. And it is the elderly that require more services and expenses than newborns, although at first blush it would seem that an infant in diapers requires more attention and healthcare than a 70-year-old retiree. Not really. To focus on some U.S. centric mathematical realities, several years ago Mary Meeker in a 500 page, softbound edition entitled “USA Inc.” put together a series of U.S. Treasury and other government reports that outlined just how dire America’s future demographic is in terms of financial liabilities. It is one thing to put readers to sleep with a 2030 forecast for aging boomers, as shown in Chart 1 but another to use the government’s own present value of these debts as of 2016. If financial market observers seem aghast at current Greek or Puerto Rican debt traps, they would surely take a double dose of Xanax when confronted with this: Fact – The U.S. government has current outstanding debt of approximately $16 Trillion or close to 100% GDP. The present value, however of Medicaid ($35 trillion), Medicare ($23 trillion), and Social Security ($8 trillion) promised under existing program totals $66 trillion or another 400% of GDP. We are broke and don’t even know it, or to return to my opening analogy, we are having our cake, eating it at the same time and believing that a new cellphone app will be invented in the near future to magically deliver more of the same. Not gonna happen folks.
Some politicians like Paul Ryan who argue for balanced fiscal budgets are intelligent sounding but relatively clueless. “Austerity – if not now, then when?”, he would argue in Reaganesque twitter. “Let’s slow down or even stop the inexorable clicking of the debt clock: 16 trillion, 17 trillion, 18 trillion”…he would add. Well yes, every little bit helps, Mr. Ryan, but the fact of the matter is (a great political phrase, is it not?) that reducing the growth rate of current government debt does little to help what in essence is a demographic not a financial problem: too few Millennials to take care of too many Boomers. Social Security “lock boxes” or Medicare/Medicaid “trust funds” which in essence represent “pre-funded” liability systems, cannot correct this demographic imbalance, because financial assets represent a “call” on future production. If that production could possibly be saved like squirrels ferreting away nuts for a long winter, then Treasury bonds or purchasing corporate stocks might make some sense. But they can’t. Future healthcare for Boomer seniors can only be provided by today’s Millennials and even doctors yet to be born. We cannot store their energy today for some future rainy day. Nor can we save food, transportation or entertainment for anything more than a few years forward. Each of those must be provided by a future generation of workers for the use of retired Boomers. And as Chart 1 points out, the ratio of retirees to workers – the dependency ratio – soars from 25 retirees for every worker to 35 over the next 10 years or so.
There’s your problem, and neither privatization nor any goodly number of government bonds deposited in the Social Security “lock box” can solve it. While these paper assets may “pay” for goods and services, their value will be market adjusted in future years to exactly match the quantity of things we buy, and that quantity will be substantially a function of the available workforce and the price they command for their services. This is another way of saying that the value of Treasury bonds and even private pension held stocks will be marked down in price as they are sold to pay for future goods and services, and that the price of these goods and services will be marked up (inflation) to justify their reduced demographic supply. Productivity gains are often advanced as a solution but productivity gains have been shrinking in recent years, and even so, employed workers cannot be expected to hand over future advances to retirees without a fight. Having more babies would also turn the trick, but at the moment, making fewer seems to be the going trend.

Investment implications? Well it is true that if much of the developing world is younger demographically (think India), then developed nations could and should transfer an increasing percentage of their financial assets to emerging markets to help foot the demographic bills back home. Long-term then, as opposed to currently, think about increasing your asset allocation to the developing world. It’s also commonsensical that if higher Millennial wages are the probable result of a shortage of healthcare workers relative to Boomer requirements, then an investor should go long inflation and short fixed coupons. U.S. 10-year TIPS at 80 basis points seem like a good hedge in that regard. And of course in terms of specific equity sectors, healthcare should thrive, while liability handcuffed financial corporations such as insurance companies as well as the bonds of underfunded cities and states such as Chicago and Illinois, should not. Other countries have similar burdens. The Financial Times reports that the UK pension industry faces a 20-year wait until they might have enough cash to meet their liabilities in 2036. Until then, they cannot. In general, it seems demographically commonsensical that Boomers have in part been responsible for asset appreciation during the heyday of their productive years and that now, drip by drip, year by year, they will need to sell those assets to someone or some country in order to pay their own bills. Asset returns will therefore be lower than historical norms, especially because interest rates are close to 0% in developed countries.
Demographics may not rule absolutely, but they likely will dominate investment markets and returns for the next few decades until the Boomer phenomena fades away. The 1% – in addition to the 99 – will need extra doses of Xanax, or additional slices of cake, to cope in the next few decades. Let the games begin.
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The U.S. government has current outstanding debt of approximately $16 Trillion or close to 100% GDP. The present value, however of Medicaid ($35 trillion), Medicare ($23 trillion), and Social Security ($8 trillion) promised under existing program totals $66 trillion or another 400% of GDP. We are broke and don’t even know it,
Kotlikoff says that the number is $210 trillion, not $66 trillion as Bill Gross states:
Kotlikoff says true US debt is $210 trillion or over $1,720,000 per taxpayer
Kotlikoff goes on to illustrate that the fiscal gap is increasing at an alarming rate and that delay makes our problem much worse. In 2003, just a little more than a decade ago, the fiscal gap was $60 trillion. But by last year it had catapulted to $210 trillion. The fiscal gap may not continue increasing as rapidly as it has over the past decade, but with each passing year - as Congress and the President do their best to avoid action - our hole grows deeper by substantial amounts.
http://www.brookings.edu/research/opinions/2015/04/08-federal-debt-worse...
I bet Bill Gross gets high
… The 1% – in addition to the 99 – will need extra doses of Xanax, or additional slices of cake, to cope in the next few decades.
Dear Bill,
Go fuck yourself and the rest of the 1%!!!
Looney
I guess he has been reading Harry Dent's books too.
The response to the need to support more and more aging Americans is to put the youth out of work. Government in action.
Another reference to globull warming by Gross in the article in his painting of a negative future.
As I have said before here: Globull warming is quite obviously a scam, hoax and extreme power grab by governments. The only outcome that we need worry about in this area is what governments do to our liberties in the name of "war on terror" and "glo-bull warming".
I will also say again it is an automatic disqualifier in my book for it implies one of the following:
-1- Gross does not understand what glo-bull warming is and it taken in by the agitprop
-2- He does understand and is parroting the lie for reasons of being PC or being part of the Ruling Class Oligarchy.
In this articles case I suspect the future will be sufficiently bleak to match his prediction but I must note in future points #1 & #2 because he has tripped over what even amateurs can see using a modicum of either scientific acumen OR political acumen.
Just ask yourself why did you hear nothing more about the ozone layer after DuPont got its R-12 refrigerant banned just as it came off patent much to its benefit in regards its new version of car air conditioner freon.
And if you still disagree me - you sir are worse than Hitler.
"The dirty little secret about the great economic growth we have had in the West, particularly after World War 2, is that it was largely possible due to unprecedented and unsustainable population growth."
Read more at - https://tomrask.wordpress.com/2015/04/05/the-demographic-ponzi-scheme-an...
Sort of. The USA uses the rest of the world as the basis of its empire and a tribute of sort is exacted by having the reserve currency. It can not go on forever in the same manner. However automation is going to very soon and very quickly make a huge percentage of these people obsolete.
these number represent death. death due to war, insolvency and just plain ole shtf outcomes...
Where's the cake? Iwas told there would be cake!
the cake has been eaten and shat out and the fed has sandwiched it for 99 percent of the distracted idiots that are clueles as to why sandwiches don't taste the way they used to...
@DownWithYogaPants
That must be why all major corporations and the pentagon are preparing for the consquences of a warmer world. But what do they know, right?
Got stupid?
Corporations? -- AKA home of the Ruling Class Oligarchy. Perhaps you should review who populates these board rooms and how they get there. HINT: You have to be a member of the club they are hitting you with.
Pentagon? -- I'll leave you alone with google to figure out how political that organization is. HINT: You don't move up unless you are quite the toady. Starting place: http://fredoneverything.org/ Fred Reed was in the armed services and is quite plain spoken about the officer personality type.
If you're asking if I'm smarter than all these corporations I will answer YES. But that's easy. Professional political fools of all stripes are generally easy to out think. They simply do what they are told. Are there individual engineers and scientists smarter than I working in these companies? Likely yes. I'll give any of them a run for their money though. The problem is any opinion that differs from your mind numbed "glo-bull warming" theories will never see the light of day from government or corporations. Opinions that do not conform are serverly punished. You (Lord Koos) know this is true because you are part of the intellectual coercion efforts. Even you (Lord Koos) are not slow enough to think it works any other way.
Your last question: "Got Stupid?" .......Yes I do! I've got you completely owned Lord Koos and that means I have a whole truckload of stupid in the form of you. Only the slow witted believe in glo-bull warming. It must suck to be such a conformist kool aid swill drinking toady. Try thinking outside the box. It's easy. First thing you do is not look to others for your validation. The scientific method practiced with strenous sweaty scientific integrity is its own form of validation and reward. It has been the singular pleasure in my life to be a scientist and an engineer dedicated to seeking the profound unalterable laws of the universe unsullied by the touch of human hands or human self interest. This pleasure for those of us gifted with the mindset appropriate for such pursuits find the gratifications to be more profound than those available from mere human activities such as sex or money.
If you want to begin to understand the real scientific method and its mother scientific integrity you can start here: Richard Feynman's speech "The Cargo Cult of Science" https://www.youtube.com/watch?v=yvfAtIJbatg
Actually, the Fed has been fighting demographics for decades now with rate cuts and debt...but there is nothing temporary about the demographic changes
http://econimica.blogspot.com/2015/12/the-greater-depression-will-be.html
http://econimica.blogspot.com/2016/01/sources-of-growth-examined-and-found.html
With technology making evr more jobs redundant, the issue of demographics becomes irrelevant. What needs to be looked at now is whether we keep breeding until we ruin the environment and die off or whether we introduce birth control rules and work towards a population on the planet that lives in balance with nature and has a realistic chance of surviving long term. Worrying about demographics is ike worrying if there will be enough horses, when automibles are taking over the transport market and it is clear they era of the horse is over.
Likely the world would be a better place if ALL countries were shrinking. I'm hardly a tree hugger and if you have noticed my other comments take pains to dismantle the glo-bull warming myth. However a planet with 1 billion people would likely be a freer / happier place.
Question is how do you get these races who breed by the K methodology to stop breeding like rabbits?
https://en.wikipedia.org/wiki/R/K_selection_theory
easy, make them rich.
It's a natural law that when you put an orgainism under intense presure it creates more seeds, babies, tree branches etc. Coppice a tree and you'll end up with 100 or so new branches from the stump. When organisms are not pressured, it's not really a problem.
Education is what causes people to have fewer children. There are miles of stats that back this up.
Education is just one of the dimensions of wealth. To educate children or adults for that matter, you need enough free'd up time and resources to send the kids to school instead of the subsistence farming fields.
How does this supposition jive with black reproductive rates in the USA?
Well I'm hoping you are correct. But the K strategy is to breed in high numbers and not care so much for your progeny due to predatorial forces. And just how do you make blacks rich when they are as a group deficient 1 stardard deviation of IQ ?
They can't all be "rap artists".
You're suggesting the Soylent Green model of controlling population?
There was a very good TED talk about this. The guy (Norse? Danish?) showed how educated women stopped having 5-6 babies, and dropped down to a replacement level 2. And that happened everywhere, even in Islamic countries, if the women were given access to birth control. So he expects population to level out around 7 billion.
Of course, for the hard-core environuts, that isn't enough. Dr. Fruitfly (aka David Suzuki) wants 1 billion or less, making him an advocate for the greatest mass murder on the planet. I'm sure his idea of a 'good war' would be China vs India, with a billion dead.
Hans Rosling / Gapminder
https://www.ted.com/talks/hans_rosling_on_global_population_growth?langu...
That is assuming blacks are educable in the same sense as white europeans. That is a huge assumption which is difficult to justify.
Most people blogging on here are in the 1% and don't even realise it.
If you have little to no debt , a little property or some metals in the lake , your almost at the top of the pyramid compared to rest of the world.
And all you do is complain about it.
I'm afraid I must agree. We are the 1%ers of the plebian class.
Perhaps, but I don't think it's a stretch to say that most people here are doing their part to help their own community in real, meaningful ways. We donate food to the local soup kitchens from our farm. We're also building out local food systems, i.e. building resilience.
@ CrazyT: Per Forbes, The One-percenter threshold is $380K/year. I doubt even 10% of ZH commenters are there.
That's in the US. I'm talking globally here , ie - including the other 6.75 billion people that live on this planet. Globally it's likely anybody taking over 10k is in the 1% class.
Agreed. The NY Times recently wrote that there are about 80,000 people worldwide whose net worth exceeds $30 million. That's one in 90,000 people (based on 7.2 billion current pop.). To me, they are the real one-percenters or rather the "1/1000th of one percent"-ers.
Your point is a good one. Many liberal libtards complain about the 1% not realizing they are in a 1% class of the global population. They live high on the hog using the reserve currency to slave out 3rd worlders and they have no clue about it. It makes me laugh violently and sadly when I see it because it's so obvious.
This cartoon applies: http://www.amarketplaceofideas.com/wp-content/uploads/2012/11/The-One-Pe...
Uh oh, I better hire a private security force to guard my lake and 1 acre. How many people would you recommend? 100 or 200?
Sorry Looney, Gross got the math right. Don't exactly agree with everything but.... I see a whole generation retiring into poverty and dying penniless. Better start stocking up on cat food and Kraft dinner.
"I make nothing, I own everything."
-Gordon Gekko / Wall Street
These Scum Fuck Traders & Investment Bankers do not produce anything of Value or anything productive. Only Murder, Death & War.
Actually the "additional slices of cake" quote is a veiled reference to the French revolution - a tad more reserved than the usual "guillotines" of whch most ZH readers are so enamored.
We have property in Coran Del Mar. Yes, Mr. Gross does just fine and was a product of the 70's and 80's (when he really had foresight). Always called him "Mr Gross" since I have known him since I was a kid.
too few Millennials to take care of too many Boomers. Social Security “lock boxes” or Medicare/Medicaid “trust funds” which in essence represent “pre-funded” liability systems, cannot correct this demographic imbalance
Jeb "Act of Love" Bush says to elect him (or Marco), and the unwashed hordes will take care of everything.
Too few WHITE millenials, that's the real, unstated-in-the-mainstream, issue at hand.
Actually Chinese asians seem to do well when given a set of cultural instructions. However I am concerned their mastery of the subject is parroted. How else to explain China not having long ago surpassed the USA?
But point well taken. No country made up of Niggerians or Mexican Indigenous was ever slated to create or maintain the technologies the USA has.
Quite in fact I do worry with our immigration policies that the USA is finding itself with people treating science with Voodoo-like superstition as is the case with these "Church of Glo-bull Warming" adherents that think because they took a 4th grade science course that they understand glo-bull warming "science". It is a topic deliberately chosen to be conceptually simple and devilishly requiring an experience in science and more exigent yet a scientific integrity to understand what is really happening: To Wit - A scam.
Everywhere I look I see a society where we engineers and scientists have made things too easy. This has led to people with social justice degrees such as "woman's studies" and "African american ingenuity" thinking they are actually productive citizens. They are misguided and think they are geniuses because they can use a technology that others created. It's almost as if Planet of the Apes is turning into reality with no needs of the sophisticated makeup since most of the graduates of these disciplines are horribly ugly already. Furthering the similarity as in the "Planet of the Apes" the throwbacks are outbreeding the skilled and appear to be taking over. Every day you see more cases of the gorillas, orangutans and chimpanzees entering positions where they can tell high functioning humans when to jump and how high.
Wow!! +1000.
Excellent post. Yup, and it seems like everyone's kids are geniuses because they can use technology. And what about the clock-kid, Ahmed Mohammad .... he did not do shit yet is being glorified as the next Einstein. Every day I feel like I am finding fewer people who have not been consumed by the madness.
Africa was destroyed by collonialism by the British, French, Germans, Belgians, Dutch, pretty much everyone. It wasn't long ago that Europe was ruled by roaming bands of Goths, Visgoths etc. A thousand years ago the Muslim societies had the cutting edge technology. A little over a hundred years ago the Japanese were blackening their teeth and using excess human labor to power machines by putting people on human treadmills.
The West is not any better or worse than these other continents or groups of people. We simply got a bit of luck by introducing Magna Carta, the rule of English common law, private property rights, and the next step in innovation from the Magna Carta, the US Constitution. Now that our dear leaders have tossed those differentiators in the fire, expect a reversion to the mean.
Oh, and our dear leaders can get fucked.
I work in science and technology. Funny how even for just one person like me LUCK has never been a workable strategy! Can you please drop a note in as to how to effectively use infinite banks of chimpanzees to type endlessly and KNOW when they finally arrive at the works of Shakespeare??? I mean seriously if you can do that I'll pay you. No kidding I will pay you because I'll be a billionaire if it works.
Africa fucked up by outsiders? The only way I can accept that as true is with the point of view that the African was never meant for modern society. If that is what you mean then ok maybe. What you are saying is they evolved in an environment / culture in which they were suited and when the Europeans arrived they simply changed these conditions to something Africans could not adapt to in a reasonable time window on the order of hundreds of years.
Any other point of view I can quickly dispatch by saying not a single country in Africa has really made it as a modern civil society.
Luck may not be a workable strategy in your own eyes, but science is one of THE industries where a little luck is very helpful. Innovation is always a combination of genius and luck. Think of all the product innovations that weren't exactly as intended: Kevlar, super glue, the light bulb, etc etc. Knowing the chemistry or science was certainly essential, but tinkering is far more valuable than most people give credit for.
You could also make the argument that Magna Carta, English common law and private property rights and individual freedom were't luck, but intended. However, that's what made the west thrive.
Regarding the monkeys on typewriters question, it just depends on how many monkeys you have. I think it was Pascal that stated that any possibility that has a probability other than zero will happen eventually. That's just another way of stating the common monkeys on typewriters discussion.
Luck made the West strong, luck made the Western scientists make breakthroughs, luck enabled the Founding Fathers to devise our system of government. Luck enabled Beethoven and Mozart, luck guided Locke, Smith, Socrates, and Plato. There were bushmen in Africa doing all the same things the same way, but damn it, every time they almost gave the world something tyuly exceptional, luck prevented it!
@SgtShaftoe: You must not work in science guy case every project I've ever worked on has required complete and utter understanding to make a product that didn't do surprising undesirable things. There is randomicity entering the input end of the black box but order and understanding exiting the output. It's that quality of filtering the random signal in the input that you have to rate the quality of.
Simple fact is the western european approach worked better and is more advanced because that black box filter is better than the african or asian version. And that my dear sir is no accident or random value. It is a value set by the combination of genetics. Yeah the genetics was created by a random process but the results are now measurable and in no way do you get random results. You get repeatable means.
In the end it appears you are attempting to be an apologist for the African and otherwise behind state of the art cultures. I'll have none of that thank you. Excuses Excuses!
Don't let those sun shades fool you
And as WE know, from lesson #1, the debt cannot be paid off under our current system. Even if it were possible, and it's not, paying down the debt, or even slowing it will crash the system.
Uncle Sam is the buyer of last resort. He's driving the bus now, and if it goes below 75 mph, it blows up.
We all know, the only solution is to blow up, and rebuild from there. But the pain will be catastrophic.
Maybe this is it? I'm not convinced. They are some sneaky bastards, and so far, I'm amazed they defy gravity and the other laws of physics.
i think they can continue to pull rabbits out of a hat for a while....but we are beyond the tipping point.
Agree, which is why any "austerity" platform is DOA. Can't even slow down the pace of this as it is already written in the wind with aging boomers etc. Thus there will be a Mad Max collapse within the next 30-40 years which I would hope to watch on my CCTV from my bunker in Canada...I expect when the lawlessness starts not many will head North but rather towards warmer climes where you can pillage year round.