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Page added on September 27, 2014

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Crash Course – Chapter 15 – Demographics

Age distribution is too lopsided to support entitlements

When Americas social security and health care and entitlement systems were first conceived, the country has much different age distribution. There were roughly 7 active workers per retiree, and the ability to transfer some of that employee wealth to support older citizens was supportable.

But with the arrival on the scene of the Baby Boom as well as advances in longetivity, the math changed dramatically. By 2005, there were only 5 workers per retiree. And by 2030, just 15 short years away, there will be less than 3.

Our national demographic architecture no longer can afford the entitlement system we have. And that’s even assuming entitlements were currently sufficiently funded. But as the last chapter showed, the existing programs are underfunded to the tune of $100-200 Trillion.

America’s demographic situation is a ticking time bomb. The older generation is already competing more fiercely than ever with younger ones in the job market, as many seniors can’t afford to retire. Youth also has to contend with trends like automation, outsourcing, and high unemployment/underemployment, which further handicap their ability to build capital and, importantly, to afford all the assets (stocks, houses, etc) that the Boomers are counting on selling to them.



16 Comments on "Crash Course – Chapter 15 – Demographics"

  1. Kenz300 on Sat, 27th Sep 2014 5:39 pm 

    Small changes like raising the cap on taxable wages would go a long way toward stabilizing Social Security.

    RepubliCONS and their top 1% benefactors are against that.

    Inequality is growing……. the RepubliCONS are facilitating that inequality because that is where their support comes from. They are only concerned with more tax breaks for the rich. Then complain about the deficit it caused. What hypocrites.

    Makes no sense that so many over 65 voters are supporting RepubliCONS when they want to eliminate both Social Security and Medicare. Nothing like voting against your own best interests.

    Shows how people can be conned. Faux Noise is a 24/7 RepubliCON infomercial. It is where facts go to die.

  2. Davy on Sat, 27th Sep 2014 7:37 pm 

    Entitlements are the least of our worries at this point. Just like the pensions and stock portfolios, these abstractions are nothing more than an illusion of wealth. When the descent gathers steam the value of these paper assets will evaporate. Liabilities will evaporate as individuals and business close their doors. There is no way to tell the degree or duration of this potential descent but we can say there is severe imbalances, stresses, and pressures. In today’s market with today’s inflated values, the leverage, and the counterparty risk from rehypothocation any contraction will cause serious risk. When the margin calls go out and the market gets flooded with liquidating assets I imagine we will see a herd rushing the door. The problem is a rushing herd cannot get through a door so we will see paralysis from frozen markets and low liquidity from nervous creditors. The central banks have no tools anymore that is plain now. Diminishing returns to the effectiveness of these tools were hit 4 years ago. Now these tools are a liability. They have no clue how to unwind these market distorting positions. These positions are just so large relative to the real economy it is mindboggling. The entitlements in the post BAU world will be at the level of the family, tribe, and small community through the gift economy. Large abstract plans for the care of the old will be meaningless. Care for the old will be through the family. Not only that but old will change relative to a post BAU decrease in lifespans. I am in my 50’s and do not expect the opportunities to live to my 80’s like my older generation. I may make it but odds are mid 60’s is more realistic. BTW I am taking care of myself for these reasons.

  3. Plantagenet on Sat, 27th Sep 2014 7:39 pm 

    Trying to blame the Republicans and Fox News for social security’s problems doesn’t make much sense, when the dems are the ones who are in charge in DC. Obama has been in office now for almost six years and he hasn’t made the slightest effort to fix Social Security’s problems. In fact, rather than fixing the problems at social Security to guarentee benefits for seniors, Obama is currently trying to CUT social security benefits for retirees.

    http://www.foxbusiness.com/personal-finance/2014/03/12/obama-budget-targets-social-security-benefits/

  4. Kenz300 on Sat, 27th Sep 2014 7:50 pm 

    An article from Faux Noise…… where facts go to die..

    Faux fought a legal battle for the right to bend the truth under the guise of opinion. Some people mistakenly take what they say as facts and not the twisted propaganda of the top 1%.

  5. Davy on Sat, 27th Sep 2014 7:56 pm 

    Planter, I don’t see any evidence of anyone in charge there. It looks like a big free-for-all to me. I do see the banksters and lobbyist with allot of pull. MIC is strong along with their uniformed friends. The prostitutes and drug dealers have good pull. The place resembles a thoroughly nasty amalgamation of the worst of all worlds drawn into a swirling black hole called DC. Planter, you are correct in that the republicans and fox news are not to be blamed when considering the others.

  6. Plantagenet on Sat, 27th Sep 2014 8:02 pm 

    Davi—I agree DC is a mess and both sides are to blame. Have a GREAT DAY!

    PS: I’m not sure who you mean by MIC. “Made in China”? Mic Jagger? The Irish? Who are the mysterious MIC and “their uniformed friends”??

  7. Davy on Sat, 27th Sep 2014 8:08 pm 

    Military Industrial Complex

  8. Plantagenet on Sat, 27th Sep 2014 8:26 pm 

    As in Eisenhowers famous dictum…”beware the MIC”.

    Yup—you’re right—the MIC is indeed strong. As are GoogleYahooAppleFacebook, the AFLCIO, the OilBiz, Banks, Fannie and Freddie, the AutoBiz, the HealthcareBiz, Holllywood, Finace, etc. etc.

    If you go by percentage of the economy, MIC isn’t the most important sector—manufacturing as a whole —including all defense purchases—has been in huge decline in the US for decades. The three biggest sectors in the US economy today as a percentage of GDP would be Finance, Healthcare, and the Federal Government itself.

  9. Makati1 on Sat, 27th Sep 2014 9:55 pm 

    Davy, entitlements are near the top of the elite’s problems if they want to keep their power and their wealth. Therefore, those will be among the last to go in a collapse. All retirement plans, (IRAs, 402ks, government, veterans, etc.) will be ‘nationalized’ and put into the entitlements kitty. We already see it happening as cities and states ‘borrow’ from their retirement funds to pay bills. Those trillions are too tempting and juicy for the Feds to ever remain free.

    My step-sister has already cleaned out her 401k and used it to buy a small farm in Virginia. She is one of the smart ones. Now 50 and is in her 4th year of college, getting a nursing degree, while she raises 4 kids with her carpenter husband.

    As for myself, I know they will end eventually and I am prepared for that day. Are you?

    BTW: There are no ‘entitlements’ here in the Ps that make a big difference in their lives, so the loss will hardly be noticed by most. If you are disabled, you sell newspapers, candy and cigs on the street, 12 hours per day, 7 days a week. Or you collect plastic from the trash bins to sell at the recycle lot. Or you go into some other small food business that allows you to earn a living. Try that in the US and you would be in jail.

  10. Makati1 on Sat, 27th Sep 2014 10:16 pm 

    Plant, the MIC IS the government these days. And where do you get the “huge decline” BS? Dipping into the cool aid again?

    The MIC is not only the military, it is Homeland Security, the NSA, the State Department, much of our ‘foreign aid’, research budgets at universities, 800+ bases, and on and on. The totals are well over $1 trillion per year and growing.

    As for the ‘financials’ they are already doomed to fail. Apple is nothing compared to the NSA. All corporations in the US have to bow to the government these days if they want to remain in business. The Banksters are profiting from all of it, as usual, and will keep draining the blood of the world until they are stopped by a catastrophe like a nuclear war.

    As for the ‘entitlements, they are important to keep the sheeple from waking up and taking their guns into the streets. They too will continue as long as possible, but all others will shrivel up and disappear in the near years ahead.

    http://useconomy.about.com/od/usfederalbudget/fl/FY-2014-US-Federal-Budget.htm

  11. Plantagenet on Sat, 27th Sep 2014 11:05 pm 

    Makati—I got the “huge decline” from US economic data, i.e. the actual facts. Look at the numbers—US manufacturing’s share of the economy has been shrinking for decades—and military manufacturing is the “I” in MIC.

    Yes, the military, NSA, etc. are a big component of government spending, but the government spends more on health care and pensions. Even things like education and transportation and welfare and interest payments, when combined, add up to more than defense spending.. The military spending is less than 1/4 of total federal spending. Things have changed since Eisenhower’s day—today the US government is mainly in the healthcare, pension, welfare and other transfer payments biz.

    2014 FEDERAL SPENDING

    Pensions 921.8
    Health Care 969.8
    Education 112.6
    Defense 820.2
    Welfare 395.9
    Protection 34.1
    Transportation 95.5
    General Government 45.3
    Other Spending 31.8
    Interest 223.5

    Total Spending 3,650.5
    Federal Deficit 648.8

    CHEERS!

  12. Makati1 on Sun, 28th Sep 2014 1:28 am 

    Difference is, Plant, today the government pays for the military industrial complex by printing the cash. Taxes don’t begin to cover all the bills.

    “…The U.S. military budget is $756.4 billion for FY 2015. This includes:

    $495.6 billion for the base budget of the Department of Defense (DoD).
    $85.4 billion for Overseas Contingency Funds for the wind-down of the War in Afghanistan.
    $175.4 billion for defense-related agencies and functions. This includes the Veterans Administration ($65.3 billion), the State Department ($42.6 billion), Homeland Security ($38.2 billion), FBI and Cybersecurity in the Department of Justice ($17.6 billion), and the National Nuclear Security Administration in the Department of Energy ($11.7 billion)…”

    They don’t mention the interest on all of the debt from the Iraq, Afghan, Libya, Syria, etc., wars of late that they are still paying. Those wars were NOT paid for from taxes. The money was printed and shipped by the pallet loads.

    The US government will never tell you what they are really spending on their drive to conquer the world, but it will become apparent soon when the bill comes due to you and I in the form of the 3rd world outside our front door.

    http://useconomy.about.com/od/usfederalbudget/p/military_budget.htm

  13. Makati1 on Sun, 28th Sep 2014 1:38 am 

    BTW: the numbers are just for publication. The US has not lived inside it’s budget for decades. That is the problem. National debt of $17,000,000,000,000.00+ and set to go over $20,000,000,000,000.00 by the end of Obama’s reign. Much more than the REAL GDP of the US. The US is bankrupt as we will see when the dollar falls off the reserve raft and has to swim with the rest of the world currencies.

  14. Davy on Sun, 28th Sep 2014 6:09 am 

    Planter, great point on the soft government and national spending. I was just being superficial critical of DC in my mentioning of MIC. You are in fact correct on the spending issues and have pinpointed the real straw that will break our backs. These healthcare costs and the size of government cannot go on. Here your “O” critique is valid. “O” care is a great idea in abstraction but not in practice in a time of diminishing returns and limits of growth. I realize wealth transfer is unfair. “O” is trying to mitigate this wealth transfer on the level of healthcare but what he did is add a new layer of cost and complexity. This cost and complexity is both in policy costs and perception. He lost allot of political capital and created huge divisiveness at a time when cooperation is needed to face our many predicaments. One such predicament is healthcare itself with increasing costs, declining national wealth, and aging population. Old people getting end of life care at the level they do today can’t go on. We will soon be back at pre-1940’s healthcare like we see on the old Hollywood shows not like today’s modern ER shows. I am in my 50’s and would like to see this healthcare system in 20 years but I am well aware it may be be gone in 3-5 as we know it now. Good point Planter. OH, Planter, just bark back at the dog. Speaking of the dog, some people just can’t stay balanced or level. They have to have drama and exaggeration. What are they trying to prove? Do they want to make a point or are they making objective points to make a subjective personal point.

    Woof Woof
    ^=^

  15. noobtube on Sun, 28th Sep 2014 8:03 pm 

    From my understanding, the greatest cost of war, occurs 40 years after its end.

    So, the US paid them most for World War I, in 1960.

    It paid the most for World War II, in 1980.

    This is because of all the old-age pensions paid to soldiers who fought in those wars.

    Now, the United States is in perpetual war mode…

    with TOO BIG TO FAIL banks.

    Talk about intentionally wrecking your budget.

  16. Davy on Sun, 28th Sep 2014 8:36 pm 

    Noob, “this does not compute” goofball

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