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A World Without Retirement
The population is getting older and the welfare state can no longer keep up. After two months of talking to people in Britain [or the U.S.] about retirement, it’s clear that old age is an increasingly scary prospect.
We are entering the age of no retirement. The journey into that chilling reality is not a long one: the first generation who will experience it are now in their 40s and 50s. They grew up assuming they could expect the kind of retirement their parents enjoyed – stopping work in their mid-60s on a generous income, with time and good health enough to fulfil long-held dreams. For them, it may already be too late to make the changes necessary to retire at all.
This is what a world without retirement looks like. Workers will be unable to put down tools, even when they can barely hold them with hands gnarled by age-related arthritis. The raising of the state retirement age will create a new social inequality. Those living in areas in which the average life expectancy is lower than the state retirement age (south-east England has the highest average life expectancy, Scotland the lowest) will subsidize those better off by dying before they can claim the pension they have contributed to throughout their lives. In other words, wealthier people become beneficiaries of what remains of the welfare state.
Many now in their 20's will be unable to save throughout their youth and middle age because of increasingly casualized employment, student debt and rising property prices. By the time they are old, members of this new generation of poor pensioners are liable to be, on average, far worse off than the average poor pensioner today.
The Demographic Depression Will Overwhelm Central Bankers Over The Upcoming Decade
The decelerating growth and/or outright decline of the working age population is clearly visible in every part of the world. This article details where the deceleration began and the extent of the decelerations / declines. The reason this is so important is that the majority of economic growth is driven by the rising demand represented by the growth of the working age population (and their increasing quantity of employed persons). But not just the rise of any population, but those of means, those with savings, and those with access to credit. This growth drives mega infrastructure projects, buildouts of supply chains, increased production, and ultimate rise in consumer demand. Absent that population growth (particularly among those with means) governments have been "building bridges to nowhere", "building ghost cities", providing "lower for longer", ZIRP, NIRP, and monetizing debt, etc. etc. This is all ultimately a fools errand only worsening the ultimate reorganization.
Why? The working age populations earn and spend about double of those on fixed incomes among the elderly populations. The working age populations are at full employment and little to no further growth in employment is possible (detailed, HERE). Elderly utilize little to no credit and focus on paying off their debts...thus despite low rates, money velocity will keep on tanking. The declining interest rates, rising debt, and ever greater centrally controlled markets are the flip-side of the charts I show below. The below charts all show the ten year change of the 20 to 65 year old population (and percentage change in that working age population divided by total working age population) versus the same for the 65+ year old populations.
DYI: What
is on the horizon is an upcoming deflationary smash similar to the Japanese
experience. Real Estate whether residential
or commercial along with stocks will decline in value significantly. Bond yields among high quality corporate's and
government bonds will decline. High
yield/junk bonds many will go bust with yields moving up to fully relate to the
risk. The only reason asset prices have
remained massively overvalued is due to world wide central bankers driving down
interest rates. A mild recession that I’m
anticipating will produce negative interest rates going out with 3 to 5 year Treasury
notes!
So hang onto hats and your cash and precious
metals better values are ahead.
DYI
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