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The Winner in the Generational Financial War goes to the....Boomers!


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2015 Jan 27, 12:07am   19,632 views  47 comments

by Indiana Jones   ➕follow (0)   💰tip   ignore  

http://www.oftwominds.com/blogjan15/generational-war1-15.html

" The Federal Reserve Has Declared the Winner in the Generational Financial War (January 26, 2015)

"The policy of safeguarding Boomer benefits with asset bubbles will lead to the destruction of the unprepared, the unwary and those who foolishly trusted our "leadership" and central bank to tell them the truth.

Though it is exceedingly politically incorrect to mention it publicly, a financial war between the generations is being fought in the U.S. and every other developed nation that has promised social welfare benefits to its burgeoning class of retirees.

The war is being fought on multiple fronts: political promises, interest rates, housing, central bank policies and official rates of inflation, to name a few of the top battlefields.

Though no one in power will state this publicly, the Federal Reserve has already declared the winner of the generational war: the Baby Boomers won and Gen-X and Gen-Y lost. Fed policies insure the Boomers will benefit from financial bubbles inflated by the Fed, and the following generations will lose--not just this year or next year, but for decades to come.

Any nation that offers its retirees social welfare benefits (pensions and healthcare) faces a no-win demographic crunch: the number of retiring people entering the class of beneficiaries far exceeds the number of additional full-time jobs being created. In other words, it's not just a matter of having enough young people to support the rapidly expanding cohort of retirees--there must be enough good-paying full-time jobs for the young people so they can pay high taxes to fund the retirees' benefits and support their own consumption/saving.

Let's cover the fundamentals of the mismatch between what was promised to retiring Baby Boomers and the generations that must support their retirement.

The fact is that the number of full-time jobs paying more than minimum wage has stagnated while the number of retirees qualifying for pensions and healthcare benefits has soared. In the good old days of expansion, there were roughly 10 full-time workers for each retiree drawing social benefits (Social Security and Medicare).

The ratio fell to 5-to-1, then to 3-to-1, and is now 2-to-1: that is not a ratio that is sustainable without crushing tax burdens on the young.

Estimates are even worse in other developed nations. In Europe, the ratio of retirees over 65 to those between 20 and 64 will soon reach 50%--and that's of the population, not of people with full-time jobs paying taxes to fund social welfare programs. (source: Foreign Affairs, July/August 2014, page 130)

All government social welfare programs are pay-as-you-go. The Trust Funds touted in propaganda are illusions, backed by nothing but the promise to sell more Treasury debt.

The Problem with Pay-As-You-Go Social Programs: They're Ponzi Schemes (November 5, 2013)

While the costs of defined-benefit programs such as Social Security can be extrapolated relatively accurately, the program's revenues cannot be predicted because they come from wages. If recession slashes millions of jobs, or earned income declines as wage increases slip below the rate of inflation (which is precisely what's been happening for the past 6 years), revenues won't meet wildly optimistic forecasts that presume high, sustained wage and employment growth forever.

No official forecast of tax revenues supporting Social Security and Medicare ever factor in a recession, much less a decade or two of declining wages. If the forecasts were more realistic, the programs would be revealed as insolvent.

That is of course a political impossibility, so delusional forecasts are issued and accepted as "real" lest the unpalatable reality be recognized.

Defined-benefit programs such as Social Security have costs that can be estimated with some accuracy, but programs such as Medicare are open-ended: their costs cannot be predicted. Every attempt to control the ballooning costs of healthcare benefits for the retired lowers the rate of growth for a year or two, and then the costs soar once again as the number of beneficiaries and costs of delivering ever-expanding services both explode higher.

As a result of these fundamentals, the Powers That Be face a dilemma: they cannot reveal the insolvency of these huge social welfare programs, even though the insolvency is guaranteed by demographic and global-economic dynamics.

There are a very limited number of financial solutions to this dilemma.

1. Taxes can be raised. This is problematic for several reasons. One is that taxes on the self-employed and upper-middle class are already 40%-50%, as I have outlined many times. Two, the number of "wealthy" people (households earning $250,000 or more) is tiny compared to the 100+ million army of social welfare program beneficiaries.

Higher taxes and junk fees are already suppressing consumption. Every dollar of additional tax paid is a dollar that won't be spent by the household that earned the dollar.

Tax the rich is politically popular but in practical terms, it doesn't generate the revenues that are expected, for the simple reasons that A) the number of wealthy is relatively tiny and B) the super-wealthy either move their capital elsewhere or they buy political favor-tax breaks.

2. Slash benefits and limit the total Medicare costs per beneficiary. Since young people tend not to vote and older people tend to vote, this is a political non-starter, at least until 90+% of young people start voting.

3. Raise interest rates to 10+% to encourage saving and to generate a healthy return on pension funds and retirement accounts. The net result of 10% yields is the immediate collapse of the Fed-fueled asset bubbles in housing, bonds and stocks. All these currently bubblicious assets would implode.

This is also a non-starter, because the financial/political Aristocracy and owners of these assets would be devastated by the implosion of the bubbles.

4. Inflate bubbles in housing, stocks and bonds to boost the value of pension funds, retirement accounts, and government tax revenues from capital gains by pushing interest rates to zero and extending credit to speculators, financiers and marginally qualified borrowers.

The Federal Reserve has clearly chosen #4 as the only politically palatable solution. While asset bubbles create the politically positive illusion that pension funds can pay the benefits promised, retirement accounts are swelling in value and tax revenues are rising thanks to higher property taxes and capital gains taxes, this legerdemain comes with a heavy price:

Younger generations are either priced out of assets such as housing or they are forced to buy assets at inflated prices-- prices that will inevitably implode as these stupendous speculative bubbles pop. When the bubbles pop, the young people who bought into the illusion that asset bubbles can expand forever will be underwater, and not for a year or two but for a generation.

The system rewards silence and complicity. Everyone bellying up to the social welfare trough is implicitly encouraged to support the Status Quo, lest their share of the swag be diminished. That the trough will collapse is not important to each beneficiary; what's important is that their share of the swag is not diminished, even if cuts are the only sustainable way to save the programs from collapse.

I am a Baby Boomer, and in 4 short years I will be entitled to belly up to the trough and extract hundreds of thousands of dollars in open-ended benefits (at least for Medicare). I have long proposed that the Boomers collectively fall on our swords and accept the draconian cuts necessary to align our benefits with the cold reality of declining wages and employment.

The equally cold reality is that the current "solution" impoverishes the younger generations and generates a tsunami of risk that will wash away the Status Quo--including the benefits of the Boomers.

Right now, we as a nation are greedily collecting the financial fish flopping around as the coming tsunami pulls the water out of the bay and briefly exposes the sea floor. The Federal Reserve and our self-serving political "leadership" is reassuring us the water has left for good and we are free to collect the free fish forever.

This is a blatant lie. The demographic and economic tsunami is gathering force over the horizon, and the policy of safeguarding Boomer benefits with asset bubbles will lead to the destruction of the unprepared, the unwary and those who foolishly trusted our "leadership" and central bank to tell them the truth."

#housing

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1   Tenpoundbass   2015 Jan 27, 5:26am  

Melinials either they are at war with everything or thinks everyone is at war with them. Go get a fuck job already and demand the banks pay you interest on money you put in their banks. It's only a right of passage, adults world over has been doing for centuries.

2   Indiana Jones   2015 Jan 27, 9:11am  

If you are a Boomer and you think your life is tough, if you think you've had to work hard for what you have, that there were obstacles you had to overcome, that policies were sometimes set up against your success, that you had to scrimp and save to make ends meet, that you had to go without sometimes, then you have a small taste of what life is like for the generations following you. However hard you had it, can you believe it is actually harder now? i know many Boomers can't see past their shoelaces, but can you at least have some compassion for the generations coming after you who are facing obstacles you never knew existed?

4   NDrLoR   2015 Jan 27, 9:26am  

Indiana Jones says

If you are a Boomer and you think your life is tough, if you think you've had to work hard for what you have, that there were obstacles you had to overcome, that policies were sometimes set up against your success, that you had to scrimp and save to make ends meet, that you had to go without sometimes, then you have a small taste of what life is like for the generations following you.

Or the generations that preceded you. Somehow the Boomers, the most selfish, self-absorbed, self-centered generation in American history, has always thought, and indeed was described in the late 60's or early 70's, as the brightest and best generation that ever lived. Where are the results?

5   bob2356   2015 Jan 27, 9:27am  

If Charles Hugh Smith can only come up with those 4 options then he is not qualified to comment.

6   Ceffer   2015 Jan 27, 10:06am  

Kill the BoomFucks! Kill them All!

Distribute their money to the MillXYs so they can all go out and get a new tattoo and do the hookah boogey in Mom's basement!

7   MisdemeanorRebel   2015 Jan 27, 10:07am  

For the love of god, at least let's have medicare not cover Cialis or Viagra.

Men losing their sex drive at 60 is called...

Normal, nominal to age profile, par for the course, standard for a healthy person in that age range.

8   Heraclitusstudent   2015 Jan 27, 11:29am  

In the end the younger generation always win. The Millennials are more numerous than boomers, and by they will progressively take over.

9   Indiana Jones   2015 Jan 27, 10:49pm  

Heraclitusstudent says

In the end the younger generation always win. The Millennials are more numerous than boomers, and by they will progressively take over.

Yes. Eventually all the boomers will die. And then the Millennials take over. What the hell happened to the generation in between?!!! When does "The Forgotten Generation" get to "take over"?

10   Dan8267   2015 Jan 28, 9:20am  

Indiana Jones says

The Winner in the Generational Financial War goes to the....Boomers!

And this is exactly why the Affordable Care Act is bad. The Millennials, a poor and in-debt for no fault of their own generation, is forced to pay for the health care of Boomers, the richest generation ever.

Oh, but not all Boomers are rich. Well, tax the rich Boomers to pay for the health care of the poor Boomers. Don't tax the poor Millennials for that.

Oh, but the Millennials are "buying into" a system and their costs will be paid by the next generation. That's called a Ponzi scheme and it's mathematically doomed to fail. The generation that pays for the Millennials will most likely be much smaller than the Millennials.

Furthermore, the Boomers did not pay into the system at all. They are getting a free ride. But of course there is no such thing as a free lunch. If you don't pay for it, someone else does. And the cost of letting the Boomers get yet another free lunch is instability and unsustainability in the health care industry. This is not acceptable.

Every generation must carry its own weight. This principle ensures the negative feedback that allows a system to be stable. A poor or small generation is going to have fewer resources to spend on health care, but is also going to have lower health care costs due to little demand. A rich or large generation is going to have larger costs, but also more resources to spend. Having one generation pay for another breaks this negative feedback and causes a collapse of the system.

11   FortWayne   2015 Jan 28, 9:29am  

Dan8267 says

And this is exactly why the Affordable Care Act is bad. The Millennials, a poor and in-debt for no fault of their own generation, is forced to pay for the health care of Boomers, the richest generation ever.

That isn't why this healthcare act was passed. But if you let politicians divide us by generations now, since black/white isn't that profitable politically. God help us, stupid is plenty available.

12   HydroCabron   2015 Jan 28, 9:32am  

FortWayne says

But if you let politicians divide us by generations now

If by "now", you mean "since 5600 BC", then that's what they're doing now.

13   HydroCabron   2015 Jan 28, 9:48am  

Indiana Jones says

Tax the rich is politically popular but in practical terms, it doesn't generate the revenues that are expected, for the simple reasons that A) the number of wealthy is relatively tiny and B) the super-wealthy either move their capital elsewhere or they buy political favor-tax breaks.

We stopped taxing the rich 34 years ago.

The rich got richer. Everyone else got left behind.

Now we shouldn't reverse that because, according to Charles Hugh Smith, it doesn't make any difference.

Seems like it did make a difference to me, but what do I know..

I just hope that the solution to this mess falls hardest on the middle and lower classes. I hate them. They get what they deserve. After Saint Reagan cut taxes in '81, the wealthy worked harder, and everyone else slacked off - fuck 'em.

14   FortWayne   2015 Jan 28, 10:05am  

HydroCabron says

FortWayne says

But if you let politicians divide us by generations now

If by "now", you mean "since 5600 BC", then that's what they're doing now.

You'd think we would evolve as a race to not fall for that politician trick anymore right...

15   Diva24   2015 Jan 28, 10:37am  

P N Dr Lo R says

the most selfish, self-absorbed, self-centered generation in American history,

Did boomers invent the selfie?

16   MisdemeanorRebel   2015 Jan 28, 11:06am  

Diva24 says

P N Dr Lo R says

the most selfish, self-absorbed, self-centered generation in American history,

Did boomers invent the selfie?

Yep. Ask Dr. Laura Schlessenger. They just did it analog, with Polaroids.

If you're curious, you can find it on Google. She was married at the time, and the guy she did it for (not her husband) got her her start in radio.

Edit: This was before shaving was the style, so I hope you like fur.

17   Blurtman   2015 Jan 28, 11:10am  

thunderlips11 says

For the love of god, at least let's have medicare not cover Cialis or Viagra.

Men losing their sex drive at 60 is called...

Normal, nominal to age profile, par for the course, standard for a healthy person in that age range.

The future lies in life extension via new technologies.

Confidentially, cyborgs are already amongst us.

18   Heraclitusstudent   2015 Jan 28, 11:25am  

Dan8267 says

And this is exactly why the Affordable Care Act is bad. The Millennials, a poor and in-debt for no fault of their own generation, is forced to pay for the health care of Boomers, the richest generation ever.

As much as I don't like the way the system crushes the young for the benefit of the old, in housing in particular, the remark above doesn't make sense.

There is no example of society in which the young do not pay for the healthcare of the old. And for good reasons: Once one retires, one does not contribute to production. That's exactly when one needs the most care. This care was always taken from the production of younger people, and this will always continue to be the case.

19   Dan8267   2015 Jan 28, 12:08pm  

Heraclitusstudent says

And for good reasons: Once one retires, one does not contribute to production.

That reason, singular, is not a good one. Over the course of a lifetime, one builds up wealth. The Boomers who did well are far better suited to subsidize the Boomers who did not than the Millennials are. With the exception of Zuckerfuck and a few others, no Millennial has done well. They are poor, highly unemployed, highly in debt, and when they finally get jobs those jobs won't pay nearly as well or be nearly as secure as those held by the Boomers during their working years.

Also, one can pay into a system for a lifetime. For example, we all pay into Social Security for our entire working lives. The Baby Boomers did not pay into the mandatory health insurance their entire life. So they are getting a free ride. It's like if you never paid Social Security taxes but got full benefits on retiring. Where does that money come from?

And the Boomers are the largest generation ever, so placing the burden of their costs onto the smaller Millennial generation is also far less effective them placing the burden on the Boomers themselves. There is always a 1:1 ratio of people in generation N to people in generation N. When the Millennials finally retire, the ratio of Millennials to their grandchildren could easily be 2:1. It's mathematically stupid to structure the system to rely on one generation paying for another.

Negative feedbacks are the key to stability in any complex or dynamic system. This is a cold, hard, immutable, mathematical fact. Either you get it or you don't, but either way doesn't change reality.

20   Heraclitusstudent   2015 Jan 28, 12:32pm  

Dan8267 says

Over the course of a lifetime, one builds up wealth.

Build up wealth just means they use this wealth to get the young to work for them. Bottom line: the result is the same: the young work for them.

Instead of the young working to provide services for themselves and each other, they work to provide services to the old.

There is no avoiding this.

21   MisdemeanorRebel   2015 Jan 28, 12:56pm  

Medicare Prescription Drug Program, a massive benefit, which was not paid into during most (or any) of the working years of older generations.

22   Dan8267   2015 Jan 28, 12:58pm  

Heraclitusstudent says

There is no avoiding this.

I have given us a way of avoiding this. You just chose to dismiss it.

I've also given you several very specific and verifiable reasons to have each generation pay it's own way. You have not refuted any of these reasons. Nor have you given any reason why the younger generations should pay for the older ones other than "it's not possible to do it any other way", which has been thoroughly disproved by the fact that I've given you another way.

Feel free to disagree with my values, but if you disagree with the facts or the logic I present, you are simply wrong. It's damn rare that I get facts or logic wrong, and if I do I correct them quickly. Arguing against the facts or logic is a foolish as arguing that the square root of two is a rational number. You are simply wrong.

I suggest you go back over my posts and identify how the system can be change and then list the specific justifications for the change. Then and only then can you make a value preference argument against my proposal.

23   Dan8267   2015 Jan 28, 1:00pm  

thunderlips11 says

Medicare Prescription Drug Program, a massive benefit, which was not paid into during most (or any) of the working years of older generations.

Yep, another way older generations screw over younger ones.

According to my values, each generation should contribute more to the world than they take out of it. Each generation should leave the world a little better than they inherited. Each generation should make life slightly better, not worse, for the next generation. We don't owe our ancestors anything. We owe our descendants everything. And if anyone disagrees with that, they shouldn't have children.

24   Heraclitusstudent   2015 Jan 28, 2:36pm  

Dan8267 says

You have not refuted any of these reasons. Nor have you given any reason why the younger generations should pay for the older ones other than "it's not possible to do it any other way", which has been thoroughly disproved by the fact that I've given you another way.

BS I've shown the way you proposed comes down to the same thing in reality. You choose to focus on money, which is just irrelevant and abstract paper, instead of focusing on what's happening physically: who does the work and who receives the service, which is eventually the only thing that matters.

If you are in fact arguing against this, then I'm afraid you are arguing illogically and against the facts.

25   Heraclitusstudent   2015 Jan 28, 2:38pm  

The only point where you are right is that the size of the boomer generation means more work for younger generations.

Tough luck.

26   Dan8267   2015 Jan 28, 2:45pm  

Heraclitusstudent says

BS I've shown the way you proposed comes down to the same thing in reality. You choose to focus on money

You need to listen more and speak less. I'd offer to try to explain it again, but there's no point if you're not willing to listen. It's self-evident that you are listening if you think I'm focusing on money or motivated by self-interest. I'm concern with sustainability and social justice neither of which are served by screwing over one generation for another.

Heraclitusstudent says

The only point where you are right is that the size of the boomer generation means more work for younger generations.

Tough luck.

If that's you're attitude, why should I care what you think?

I'm not a Boomer or a Millennial. I'm a Gen X. I'm not the one getting ass fucked by the selfish Boomers. In fact, the more the Millennials get fucked, the better off I am. The difference between you and me is that I'm not OK with bad things that benefit me from happening. I'd rather the world work better for all people than personally gain from the suffering of others. But again, that's a value thing.

27   Y   2015 Jan 28, 2:48pm  

fuck em...if there were no gluttons in the world we would have no use for the word...
Indiana Jones says

i know many Boomers can't see past their shoelaces, but can you at least have some compassion for the generations coming after you who are facing obstacles you never knew existed?

28   Y   2015 Jan 28, 2:49pm  

we spent it.

P N Dr Lo R says

Or the generations that preceded you. Somehow the Boomers, the most selfish, self-absorbed, self-centered generation in American history, has always thought, and indeed was described in the late 60's or early 70's, as the brightest and best generation that ever lived. Where are the results?

29   Y   2015 Jan 28, 2:51pm  

wishful thinking...
the oldster vote is revered...

Heraclitusstudent says

The Millennials are more numerous than boomers, and by they will progressively take over.

30   Y   2015 Jan 28, 2:54pm  

sounds like the original sin foisted on everyone by the libbys...

Dan8267 says

The Millennials, a poor and in-debt for no fault of their own generation,

31   Y   2015 Jan 28, 2:58pm  

why would you take the word of a racist??

thunderlips11 says

Did boomers invent the selfie?

Yep. Ask Dr. Laura Schlessenger.

32   MisdemeanorRebel   2015 Jan 28, 2:59pm  

Call it Crazy says

After reading this thread, I can only recommend one thing:

*

Then every boomer who received an inheritance passed on it, right? hahahahahaha

Our beef with many (not all) of you guys is that you took much of what was handed to you, then didn't pass it along - not even as much as you took out.

33   Dan8267   2015 Jan 28, 3:03pm  

thunderlips11 says

Then every boomer who received an inheritance passed on it, right? hahahahahaha

Then Boomers shouldn't be exploiting the Millennials like they are.

34   MisdemeanorRebel   2015 Jan 28, 3:05pm  

Dan8267 says

thunderlips11 says

Then every boomer who received an inheritance passed on it, right? hahahahahaha

Then Boomers shouldn't be exploiting the Millennials like they are.

I should point out that many Boomer Con's favorite phrase "Nobody owes you nothing" doesn't imply they won't take anything offered to them and then some with no regard about reciprocating.

"In the words of my generation, Up Yours!"

As you say, Dan, we write the history.

35   Dan8267   2015 Jan 28, 3:13pm  

thunderlips11 says

As you say, Dan, we write the history.

Precisely. Every generation has the option of leaving the world a better or a worse place, of helping or exploiting the next generation. However, the two generations after them are the ones who write their legacy.

The Boomers have lived most of their lives already and their decisions have been made. The younger generations can now judge the Boomers accurately and completely on their actions. And quite frankly, it's not looking good. The price of selfishness is an eternity of ridicule by the later generations.

I was naked for a day; you will be naked for eternity.

36   Heraclitusstudent   2015 Jan 28, 3:14pm  

Dan8267 says

I'm concern with sustainability and social justice neither of which are served by screwing over one generation for another.

Adult people always care for children and elderly. Always have. Always will. And yeah... that's work and efforts.

It is just because everyone goes through these different roles.

It doesn't make sense to argue it is social injustice, or a generation screwing an other.

37   Dan8267   2015 Jan 28, 3:16pm  

Heraclitusstudent says

Adult people always care for children and elderly. Always have. Always will. And yeah... that's work and efforts.

Straw Man argument. There's a difference between adult children taking care of their elderly parents and the Boomer generation financially exploiting the Millennials even though the Boomers have far more wealth than the Millennials. To morally equate them is disingenuous.

38   FortWayne   2015 Jan 28, 3:18pm  

Call it Crazy says

After reading this thread, I can only recommend one thing:

*

On another note, after all the taxes I paid into the system they damn better pay me back with interest.

39   MisdemeanorRebel   2015 Jan 28, 3:19pm  

Call it Crazy says

Put on your big boy pants, man up, and make your own successes!

Can't, you guys already pawned the family jewels. Even sold the tools from the garage.

Oh well, inventors of the unpaid internship, we'll just rebuild it as soon as you guys retire and get out of the damn way.

Put on your big boy XXL Depends, because if you think we're wiping your asses for $9/hr, good luck.

Oh, and that $20T Debt? Guess how we're getting out of it once we take over? Better stock up on dog food right now. Inflation is a bitch for fixed income, but a blessing for debtors.

40   Dan8267   2015 Jan 28, 3:32pm  

This thread demonstrates that Boomers are starting to fear the generation war that they've been fermenting for decades.

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