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Ponzi financing of welfare states will end in tears


patslatt

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See Mauldin Economics - Investment, Economic & Financial Analysis, Research The ageing of populations in advanced economies and sharp falls in workforces will make it increasingly difficult for governments to pay for promised retirement pensions and health care in the next ten to twenty years. Economic growth is unlikely to come to the rescue given excessive debt burdens of consumers,businesses and governments; falling or slowly growing labour forces;underinvestment in both business plant and basic economic infrastructure; and the reduced impact of technological change.

Countries like Germany that face these realities could cope.But many countries using Ponzi style financing may face the necessity for emergency draconian cuts in government spending as bond markets become reluctant to finance them. Possibly,a crisis in Japan which is the most heavily indebted government could provide an object lesson for all governments.

Since the entitlement culture makes people complacent about the financing of welfare states,considerable social upheaval is likely in future financial crises. Resort to supertaxes is likely to lead to decades of economic stagnation and emigration of the ambitious to youthful countries in Asia and South America which by then should offer good career prospects.
 
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momentimori

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Raise taxes to pay for them. Tax is relatively low compared to the rates typical 30+ years ago.

For example, higher death duties are an obvious way to recoup the cost of medical treatment for the elderly.
 

patslatt

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Raise taxes to pay for them. Tax is relatively low compared to the rates typical 30+ years ago.

For example, higher death duties are an obvious way to recoup the cost of medical treatment for the elderly.
Increases in taxes reduce private sector savings and would further reduce the weak economic growth trends of advanced economies. Higher taxes would pay for the promises but at the cost of a generation of no growth. In some countries,there will be only two workers supporting each person out of the labour force,so the tax rates would have to be very high. Would workers stick around to pay them or head for youthful countries like Mexico or Brazil which should offer good career prospects in 10 to 20 years?

Advanced economies should stop fooling themselves with Ponzi financing and do everything possible to promote economic growth,including facing down politicians who make irresponsible promises on pensions and health care.
 

Mad as Fish

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See Mauldin Economics - Investment, Economic & Financial Analysis, Research The ageing of populations in advanced economies and sharp falls in workforces will make it increasingly difficult for governments to pay for promised retirement pensions and health care in the next ten to twenty years. Economic growth is unlikely to come to the rescue given excessive debt burdens of consumers,businesses and governments; falling or slowly growing labour forces;underinvestment in both business plant and basic economic infrastructure; and the reduced impact of technological change.

Countries like Germany that face these realities could cope.
But many countries using Ponzi style financing may face the necessity for emergency draconian cuts in government spending as bond markets become reluctant to finance them. Possibly,a crisis in Japan which is the most heavily indebted government could provide an object lesson for all governments.

Since the entitlement culture makes people complacent about the financing of welfare states,considerable social upheaval is likely in future financial crises. Resort to supertaxes is likely to lead to decades of economic stagnation and emigration of the ambitious to youthful countries in Asia and South America which by then should offer good career prospects.
Only because they have the might to bully lesser countries into coughing up as some have been saying for a while now.
 

Kevin Doyle

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Increases in taxes reduce private sector savings and would further reduce the weak economic growth trends of advanced economies. Higher taxes would pay for the promises but at the cost of a generation of no growth. In some countries,there will be only two workers supporting each person out of the labour force,so the tax rates would have to be very high. Would workers stick around to pay them or head for youthful countries like Mexico or Brazil which should offer good career prospects in 10 to 20 years?

Advanced economies should stop fooling themselves with Ponzi financing and do everything possible to promote economic growth,including facing down politicians who make irresponsible promises on pensions and health care.
Economic growth at all costs eh Pat? Even at the expense of the elderly and sick. Where have we heard this before? :lol:
 

Trainwreck

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So what you do, if you can't leave the country, is save as much as you can, avoid as much taxation as you can and find a place for those savings as far away from future seizure as possible.
 

hiker

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See Mauldin Economics - Investment, Economic & Financial Analysis, Research The ageing of populations in advanced economies and sharp falls in workforces will make it increasingly difficult for governments to pay for promised retirement pensions and health care in the next ten to twenty years.
I think that historically the swing is complete from the Laissez-faire of 1912 to the nanny-State of 2012.

The balance is somewhere in between..

I suspect that many state-funded items will disappear over the next 50 years. the basic safety net may remain:Basic Free Health cover for under 18's and over 65's, Basic free education up to 18 years old, and a basic social welfare net (not cash) that ensures people dont starve or get turned out onto the street in tough times.

These three pillars will be strenghtened and enhanced.

the answer may be a combination of the european and the American systems.
 

Howya

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I think that historically the swing is complete from the Laissez-faire of 1912 to the nanny-State of 2012.

The balance is somewhere in between..

I suspect that many state-funded items will disappear over the next 50 years. the basic safety net may remain:Basic Free Health cover for under 18's and over 65's, Basic free education up to 18 years old, and a basic social welfare net (not cash) that ensures people dont starve or get turned out onto the street in tough times.

These three pillars will be strenghtened and enhanced.

the answer may be a combination of the european and the American systems.
Or perhaps adopting some of the Asian aspects which focus on reliance on the family before reliance on the State.
 

Howya

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See Mauldin Economics - Investment, Economic & Financial Analysis, Research The ageing of populations in advanced economies and sharp falls in workforces will make it increasingly difficult for governments to pay for promised retirement pensions and health care in the next ten to twenty years. Economic growth is unlikely to come to the rescue given excessive debt burdens of consumers,businesses and governments; falling or slowly growing labour forces;underinvestment in both business plant and basic economic infrastructure; and the reduced impact of technological change.

Countries like Germany that face these realities could cope.But many countries using Ponzi style financing may face the necessity for emergency draconian cuts in government spending as bond markets become reluctant to finance them. Possibly,a crisis in Japan which is the most heavily indebted government could provide an object lesson for all governments.

Since the entitlement culture makes people complacent about the financing of welfare states,considerable social upheaval is likely in future financial crises. Resort to supertaxes is likely to lead to decades of economic stagnation and emigration of the ambitious to youthful countries in Asia and South America which by then should offer good career prospects.
Wasn't FG's manifesto pledge on Universal health care supposed to deal with the health issue?
 

eoghanacht

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A report from a privately owned investment firm.

Oooh thats going to be an indepth and balanced report isn't it Pat?
 

Mad as Fish

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I think that historically the swing is complete from the Laissez-faire of 1912 to the nanny-State of 2012.

The balance is somewhere in between..

I suspect that many state-funded items will disappear over the next 50 years. the basic safety net may remain:Basic Free Health cover for under 18's and over 65's, Basic free education up to 18 years old, and a basic social welfare net (not cash) that ensures people dont starve or get turned out onto the street in tough times.

These three pillars will be strenghtened and enhanced.

the answer may be a combination of the european and the American systems.
Isn't that precisely what we have now?
 

Mad as Fish

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Joined
Dec 6, 2012
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See Mauldin Economics - Investment, Economic & Financial Analysis, Research The ageing of populations in advanced economies and sharp falls in workforces will make it increasingly difficult for governments to pay for promised retirement pensions and health care in the next ten to twenty years. Economic growth is unlikely to come to the rescue given excessive debt burdens of consumers,businesses and governments; falling or slowly growing labour forces;underinvestment in both business plant and basic economic infrastructure; and the reduced impact of technological change.

Countries like Germany that face these realities could cope.But many countries using Ponzi style financing may face the necessity for emergency draconian cuts in government spending as bond markets become reluctant to finance them. Possibly,a crisis in Japan which is the most heavily indebted government could provide an object lesson for all governments.

Since the entitlement culture makes people complacent about the financing of welfare states,considerable social upheaval is likely in future financial crises. Resort to supertaxes is likely to lead to decades of economic stagnation and emigration of the ambitious to youthful countries in Asia and South America which by then should offer good career prospects.
But all this has been known for years and if you really want to know what an entitlement culture looks like go read a little Tolstoy.
 

eoghanacht

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Or perhaps adopting some of the Asian aspects which focus on reliance on the family before reliance on the State.
Do you think everyone in financial difficulty isn't relying on family support already? And just how quickly do you think we can make this cultural shift to be 'more asian'?
 

EUrJokingMeRight

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Switzerland. Open an a/c and get a SDB/Vault beyond the reaches of Noonan and the EU.

As I've said before..anyone under 50 probably wont have a pension when the time comes. Irrespective of contributions etc.
 

hiker

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It cant be denied that the higher taxing democratic sytem that has become the norm over the last 100 years has not delivered results.

More people are better off as a percentage of the population than there were 100 years ago.

What we have discovered is that this "raising all boats" has cost more than anticipated.


Personally I reckon that we (democracies) can squeeze far better efficiancies from the current systems.

there is no denying that a wholeclass of people have grown up around "The State" structures.
Public sector workers, as a percentage of the cost of providing State services, is quite large. It has always been assumed that The State should "employ" these workers.

I think that will change.

I think the move towards the State "paying" for services as opposed to "providing" services is probably more efficiant as it should inject an element of competition into the prceedings.

Its no surprise that Health "inflation" is running at about 22%.

But then again I'm a Progressive Democrat, running dog capitalist pig and one should expect no more from a pig than a grunt.
(just getting your retaliation in early :) )
 

henryhill

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Jun 2, 2007
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It always irks me when the term "ponzi scheme" is misused in this context. It betrays an ideological positition which isn't consistent with welfare states in the first place.
 
D

Dylan2010

More people are better of as a percentage of the population than there were 100 years ago.

What we have discovered is that this "raising all boats" has cost more than anticipated.
how do you know? productivity in agriculture and manufacturing had nothing to do with it? While at the same time a section of society have become essentially zoo animals as its just not uncomfortable enough for them to not want to change their cicumstances.
 
D

Dylan2010

It always irks me when the term "ponzi scheme" is misused in this context. It betrays an ideological positition which isn't consistent with welfare states in the first place.
its true though, if promises are made and only the initial generations gain because they pass the debts on then in effect its a ponzi scheme. for a welfare system to "work" then it would have to be on the basis that a country never has a long term national debt and that demographics were taken into account when issuing "promises"
 

niall78

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While at the same time a section of society have become essentially zoo animals as its just not uncomfortable enough for them to not want to change their cicumstances.
At some stage the ordinary citizens of our countries will force change on the politicians, bankers and super wealthy zoo animals for whom enough is never enough. Their circumstances will change then whether they want to change or not.
 

Pissyknickers

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Oct 1, 2012
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Folks, Governments make illegal pay as you go defined benefit pension schemes because they give workers a false sense of future security. Instead employers are forced by law to report the liabilities correctly ie in net present value terms ie as an inflation-adjusted lump sum. This is vital worker protection.

BUT in the State scheme it doesn't apply the same rules despite the evident fact that Ireland Inc is weaker than many big MNCs who are forced by Irish and international law to report properly in their annual accounts. Instead here we run a public debate fuelled almost entirely in the fog of ignorance and prejudice that often ignores CCAG liabilities and operates on emotion and personal narratives as if this somehow is a valid financial argument.
 
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