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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Been that way since back in Pres. Kennedy's day when immigration laws were changed in favor of the "unwashed". Lotsa Dem votes.
The immigration law of 1965 was passed under the presidency of Lyndon Baines Johnson.
LBJ is also the worst president since Wilson, uncoincidentally.
Not a red/blue thing. Both sides of the fence have refused to solve this issue as far back as Reagan's years, maybe earlier.
Why? Because it is in both their interests NOT to solve it.
kw2012
"Which is why the government wants mass immigration. But the immigrants of today want benefits now, not after working decades to earn them. Our forefathers didn't expect benefits at all."
Now try to explain that to a liberal, double dare ya!
he sounds like buffett complaining about low taxes for the 0.0001%. maggot.
Wasn't my take, Buffet is scum this guy is actually telling something that is useful and real.
the maggot doth protest too much methinks
The world is over populated. plain an simple. Which is why the Obama admin doesn't want extraordinary measure taken for senior health care. Good luck getting major surgery after the age of 55.
When you are in a traffic jam, do you see yourself as contributing to the problem? Or is it everyone else?
If the world is overpopulated, do you...
You are correct. please commit suicide ASAP!
Suicide is never the answer little trooper!
Write your own "long pig" cookbook and help fix the problem.
Long pig, the other, other white meat!
PS. "Vibrants/Canadians" taste just as good as whitey!
"committed suicide." You must be White, according to ZH articles on gun deaths.
If you were black, you'd have encouraged him to shoot someone else ("pop some MFer").
;-)
keep busy ..it's the best free medicine. be productive. all labor that uplifts humanity has dignity and importanc.
F xanex and drugs.
I recommend Maui Jim shades for all our futures. .
The only hope I have is that the Boomer Generation will eventually die.
Then who would need your bed pan cleaning skills?
"The Romans gave their Plebian citizens a day at the Coliseum, and the French royalty gave the Bourgeoisie a piece of figurative “cake”..."
this very first sentence is already twice moronic
The "Populus", i.e. the Romans had to give the Plebeians citizenship, the vote and half of the magistratures, i.e. seats of government. they had to, then the Plebeians were on strike. Bill is describing policies of the empire, a few hundred years later
The French royalty did not give anything. The Bourgeoise had a frigging Revolution, and took their heads
what is about some Americans that the least they know about european history the more they think they can pontificate about it?
followed by the most moronic of all Bill Gross sentences:
"Some politicians like Paul Ryan who argue for balanced fiscal budgets are intelligent sounding but relatively clueless"
this guy rode on a bond bull market for thirty years. he made billions for being at the right spot... period. but of course, having made billions, he thinks he is right about everything
indeed, "let the games begin"
Captain obvious, no shit.
"being right" or "being smart" does not mean one is a good person.
The problem with the europeans, much like this old fuck Gross is that they have far too much time on their hands for mental masterbation.
I am long guillotines and sharecropping because (like Ghordius), this is where will end up eventually, it's simple math and physics.
https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
The core problem is not a demographic one. That is just the current configuration of checkers on the board.
The core problem is that credit can be created out of nothing. Human nature's want of things, fueled by a manufactured ability to "buy" stuff by effectively paying only interest on the underlying debt, is the core problem. People in aggregate are not disciplined enough to manage the commitment of future (yet-to-be-earned) wages to present consumption. If we were disciplined, we would buy things with presently-available funds, and there would be a lot fewer lenders in the world.
Decades of papering over the core problem has simply deferred the appearance of the Piper. But the Piper is at the door and has been for a while. The CBs are in the late throes of what probably feels like the old arcade game Missile Command.
the core problem is actually overpopulation but that's a whole other discussion...
Don't worry. Evolution and global warming will take care of that overpopulation problem. Just sit tight and keep on livin'...
Is it an overpopulaiton problem or a problem with the way we choose to live ? There's plenty of space and resources we just need a more distributed/asymmetrical existence based in self reliance at the macro and micro level. This is not so good for consolidate & control type folks or the 'life is good' consumer zombies so I won't hold my breath, just a thought.
All of the above. It's never just one thing.
Metatonic - I agree. Malthusians have been proven very wrong.
let the illegal Mexicans stay but "dont" give them citizenship - ever !!! - the price of admission - charge them for FICA but unless they are citizens - no benefits ever !!!
and we are good to go - 50 million working for the common good - all SS, Medicare covered - no fuss no muss!
"Bill Gross says"
Well that is the kind of blather that doesn't explain a damn thing.
The TRUTH is what is needed, not more palaver of the type that ALSO puts the historic American population to sleep.
Start with this:
Professor Kevin MacDonald’s ‘The Culture of Critique’ Reviewed This review, written in 1999, explains EVERYTHING that has happened to the White nations.
Then consider things like this, all brought to you by The Tribe:
The Street Gangs More Vicious Than ISIS
Back in the early 1980s ABC News Radio Broadcaster Paul Harvey warned America about the resurgence of diseases that we had long ago eradicated and of NEW diseases from the 3rd World, he said immigrants were bringing them in.
Apparently Mr Harvey's brave attempts went unheeded as the masses kept watching the Televitz just as in Fahrenheit 451. And note yet ANOTHER 3rd world MD. Good Lord WHEN will Whites WAKE UP?!!!
RESURGENCE OF TROPICAL DISEASE IN AMERICA...Increasingly found in southern states
In another post today Tyler states that Bubonic Plague has killed 63 people in Madagascar since August. It's getting Biblical now.
We have these websites to tick, tick, tick or time away. It's cheap.
Fuck the demographic ponzi scheme. Fuck fake growth based on it. Fuck the politicians using it as an excuse to import hordes of turd worlders. Fuck the public for believing them and lastly, fuck the myth that zero-immigration Japan is worse off - it's not on a per capita basis, nor on labor-substituting innovation.
I like your Truthiness. If only Talking Heads would talk like you.
Instead we get shills, careerist a-holes, and distracting bimbos.
"It’s a wonderful life for the 1% and a Xanax existence for the 99."
I know quite a few lower 1%-ers* who are on xanax from the struggle to stay on the "good" side of the event horizon...
Marijuana is a much, much safer alternative to Xanax.
& quite a few other things...
[edit:] & I know quite a few people w/6-fig incomes who use it for precisely that reason (see above)
Popov is a much cheaper alternative.
Stop buying weed from the black dude on the corner, you are paying too much. Good weed is much cheaper than average quality booze. No hangover, no od risk, some legal issues may result if caught in the wrong state.
Bill Gross has long had my respect. It was a shame his shared perceptions were muffled at PIMCO beside El Erian for so long. Glad he is speaking out again.
White European stock and Japanese .... are the new Joooos ?
One problem with this argument that I dont understand is that the world population is growing exponentially...so there are more offspring from the baby boomers than there are boomers. US has had a posivitve birth rate, that means that there will be more young people entering the work force than boomers leaving it...even without immigration. On top of that we are letting in millions upon millions of immigrants who have birth rates of +4 and higher.
If me and my wife have 3 children...we retire so 2 leave the work force and 3 replace then. As long as we have a positive birth rate and/or immigration there will always be more people working than retiring.
Brush hog, don't know your age, I'd guess about 30 ish.
I'm 53, and I can barely remember these things. I'm from Baltimore. Fair size, but had nothing on Detroit or Pittburgh.
We used to have these places called " mills". Thousands of people went to EACH of them every day. There were hundreds and maybe thousands of these mill places. ( across the land)Made steel, cars, appliances, you name it.
You did not need a four year degree to get a job there. One man could work a hard day, and earn enough to raise a family. By himself. It's true, I don't make this up.
Fast forward to today. If you are in Maryland , and want to see 30,000 people, all go to the same place to "work", it is possible.
NSA at Ft. Meade Maryland. Rt32, between Baltimore and DC.
Drive by one day, just don't take a picture. You might get shot.
As a former sports prognosticator on Ocean City local TV would say, "Bingo, baby". Blue collar hard working folks could live in fairly nice suburbs of Baltimore in late 60s, 70s...nice new single family homes in Timonium, Perry Hall, Woodlawn, Cockeysviile, Reisterstown... their offspring are suffering big time - virtually no "factories, mills" left in the Baltimore metro area... not many place to be rewarded with working a honest hard working day.
If inflation and wages and prospects and taxes and living expenses remained the same, then you would be correct in theory, but in reality it is all the opposite. It cost more in healthcare for each 6 months now, before using it, than it did to deliver both children including the gynecological visits including the healthcare premiums.
Think of inflation of "purchasing power killer" because that is what it is. So when the FED's policy is to reduce purchasing power, the message is we plan to kill you way of life and they have and are...enjoy the ride.
It's all pure madness.
We've lost our way and have completely shunned our spiritual connections in terms of what it really means to be a human being. Our religions have fostered this.
It all started with the idea that we are somehow seperate from or superior to nature and it went straight in the shitter from there.
Nothing we do is sustainable for the long term.
Nothing about modern life is sustainable for thousands of years we're causing our own misery through greed and disconnection from our spiritual nature, we're focused on things and greed to the point we have lost our souls.
Agreed. Each one of us can only change ourself, good luck to each of us who choose to unplug from this leviathan.
If a leopard can change it spots, then mankind can change his...don't fool yourself; that is to deny human nature.
^ this
A few things can solve the problems, one is for the large corporations to be broken into pieces and another is for them to quit gauging people (i.e. making diapers affordable & healthcare). Then allow people to be industrious without the red tape that prevents small entrepreneurs from doing what they do best. These are the things that stop real innovation and problem solving.
However, as that old and antiquated book of TRUTH tells us about the nature of mankind in regards to his lusts; that love of money will prevail in the hearts of many & the love of many people is and will continue to grow COLD. So we continue into the moral abyss as the annuls of history will be written on America's tombstone; similar to the Roman Empire.
I tried to start a water well company... Boy, I can do some dumb things.
we can just import people from afrika and the middle east to take care of those old white boomers!
im getting the fuck out of this country.
iceland is starting to look good..and WHITE.
As a Boomer who has worked all my life, I can only say, "Keep on fucking yourself", and stop blaming mommy and daddy. You are out on your own aren't you?