Lifetime Saving for Retirement a Sham! Say It Ain't So ....

[ASH]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

1. Moratorium on immigration until unemployment rates fall below 3-4%,
2. import tariffs with a low minimum of 25% and additional increases to offset unfair practices
3. banning of trade of manufactured goods from nations with living standards below our own

I agree that's one way to do it, but this approach of heavily regulating the supply of labor (or access to a cheaper sources of labor through trade) will raise prices as well as domestic wages.

Note: labor cannot be "mis-priced". Society is by definition a collection of individuals who agree to certain standards, both cultural and legal. Such standards can be anything, but history tells us all societies that last share similar attributes, i.e. a justice system, marriage, religious arbitration of cultural customs, etc. Labor is simply one aspect of this, and it falls at both ends of the spectrum - slavery at one end and total despotism on the other.

Thanks for the correction, Serge. "Mis-priced" assumes that there is a "right" way of pricing it. You are correct.

[ASH]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

I'm not talking about raising minimum wage or any such ridiculous crap.

Thanks for clarifying.

Why is it that minimum wage people in every other 1st or even 2nd world nation are better off?

Don't most non-Anglo countries also have more highly regulated labor and immigration, and more redistributive systems of taxation and social benefits? I believe that FIRE and the financialization of our economy have a lot to do with the increase in wage and wealth disparity in the US in recent decades, and I also believe that FIRE-friendly policies happen to be labor-unfriendly. But I think FIRE is part of a complex of economic and social policies that are driven by culture. I'd say those foreign workers are better off because their societies sacrificed some labor cost efficiency in favor of social goals, and because they tolerate a higher degree of redistribution. Those same cultural values make them less susceptible to FIRE.

Again, while I'm no 'Money should be 100% backed by gold' fanatic - it is true that the separation of money from any physical backing has greatly enabled the bankster set.

I strongly agree with you here.

[dcarrigg]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

But I hope it was clear from the context of my other posts that by "regulated labor market" I meant specifically the type or regulations aimed at raising the wages of labor by restricting its supply, mandating minimum levels of compensation, and so forth.

Fair enough, but I still don't see too much of a difference between restricting labor supply, instituting a minimum wage, and utilizing informational asymmetries to bilk the unwitting fools willing to pay too much for a product or service.

At some point there has to be a minimum level of compensation, lest there be legal slaves. In fact, slaves likely would exist in a market that didn't limit labor supply or mandate minimum levels of compensation...never mind the rest. Serge beat me to the punch.

[dcarrigg]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

Thanks for clarifying.

Agreed. Excellent post C1ue.

Don't most non-Anglo countries also have more highly regulated labor and immigration, and more redistributive systems of taxation and social benefits? I believe that FIRE and the financialization of our economy have a lot to do with the increase in wage and wealth disparity in the US in recent decades, and I also believe that FIRE-friendly policies happen to be labor-unfriendly. But I think FIRE is part of a complex of economic and social policies that are driven by culture. I'd say those foreign workers are better off because their societies sacrificed some labor cost efficiency in favor of social goals, and because they tolerate a higher degree of redistribution. Those same cultural values make them less susceptible to FIRE.

Perhaps you are right, but Rhine Capitalism grew out of a richer history of more pronounced economic crises and on-the-ground wars (hot or cold). Moreover, these 'cultural values' may also be a result of parliamentary systems of government, which may allow a more diverse set of viewpoints to enter into the national conversation.

Who is sacrificing labor cost efficiency in your view, ASH? Is it the financiers? Is it the majority of the people of a nation? Is it the national economy itself?

To prove Godwin's rule and lose on purpose, here's a quote from Second Book:

[T]he German people have no interest, say, in a German financial group or even a German factory opening a so called branch dockyard in Shanghai which builds ships for China with Chinese workers and foreign steel, even if the corporation earns a definite profit in the form of interest or dividend. On the contrary, the result of this will be only that a German financial group earns so and so many million, but, as a result of the orders lost, a multiple of this amount is withdrawn from the German national economy."

MadLib the above by replacing German with your 'post-industrial' country of choice.

The point that he's trying to drive home there is that profit alone is not necessarily good for the majority of the people of a country, nor the country as a whole. That fundamental idea seems to be the crux of the difference between Anglo and Rhine capitalism (not that this was the exclusive source of the concept).

The Anglo side seems to simply say that as consumers (which we all are) we benefit from cheaper goods made abroad. Therefore, all will be efficient when labor costs approach 0 since the social and gross national effects of driving down labor costs will be negated by cheaper goods and maximum competition. Of course, goods and services that must remain in proximity to the end-user begin to look exponentially more expensive on the open market as they are not outsourced. They are then derided as too expensive. Doctors must make less; teachers must make less; etc.

The Rhine side decides that there is a point at which even profit is not beneficial. It therefore provides an intellectual framework that may protect the national conversation from being hijacked by FIRE. I say may, because in many ways it did not.

I strongly agree with you here.

Me too. A great article was written by Heiner Ganssmann on that back in October of 2008. Forgive my translation - it has been some time:

Theoreticians define money as a social imaginative creation in which everyone believes. What is an imaginative creation? Money is the standard on which we can build, form generally binding prices, and calculate business strategies. The value of all purchasable things is represented in money.

Money has a quality that leads to periodic self-destruction. While the real money supply is limited, money opens an unlimited horizon of possibilities of choice and potential appropriation of goods.

This contradiction will worry all of us. For the user of money, more money is better than less in any case (except for a few exceptions like monks under vows of poverty). When morally harmless chances for multiplying money open up, we use them because “we are not dumb.” The amoral offers of money and goods are taken just like that.

That we all find more money better than less is suddenly denounced as greed, the greed of others. The bankers are the wolves and we are the sheep. The greed of bankers has driven all of us into crisis. Why are so many willingly blinded by the tricks of the financial illusionists? Obviously there are irresponsible speculators among bankers who gamble with the money to multiply their own wealth. But that is also true for other enterprises.

The basic problem is not the greed of the bankers. The problem is our desire for money is not tied to the increase of the things that can be bought with money.

Unbacked greenbacks certainly provide more opportunity to satiate that desire.

[c1ue]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

But I think FIRE is part of a complex of economic and social policies that are driven by culture. I'd say those foreign workers are better off because their societies sacrificed some labor cost efficiency in favor of social goals, and because they tolerate a higher degree of redistribution. Those same cultural values make them less susceptible to FIRE.

ASH,

I don't agree with this statement. The UK, for one, has a completely different culture including both an aristocracy and a significantly European Socialist unemployment model.

Yet the UK is, if anything, even more under FIRE than the US is.

As for immigration - again it isn't immigration that is the primary problem.

There are definitely pockets where H1B immigration has an impact, but from my experience the majority of immigrants work in jobs where they tolerate living and working conditions closer to their own experience rather than the conditions of the US.

While living conditions can't be changed - certainly working conditions can, and this is a function of regulation (or lack thereof).

The living condition side, however, is what FIRE has affected most directly.

In a real sense, the machinations of banksters have conspired to create an America where it is too expensive to live as a middle class American - only immigrants who are only 6 to a room as opposed to the 10 to a room in their origin nation can survive, and even then it is because they are sending money back home and intend to retire/return there.

Sure, it can be done but the reason isn't due to an act of God or Nature, it is due to the actions of banksters.

[flintlock]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

That's easy.

1. Moratorium on immigration until unemployment rates fall below 3-4%,
2. import tariffs with a low minimum of 25% and additional increases to offset unfair practices
3. banning of trade of manufactured goods from nations with living standards below our own,
4. a wage-price mechanism
5. tax rates based upon multiples of the average income, i.e. fix the maximum income a citizen can earn by his own labor at say 100 times the average and by usury say 50 times the average.

.

Your list is similar to what I came up with on my own. Especially #1 and #3. Only I don't think it is easy. These things lend themselves to unintended consequences. I'll admit to having not really thought them all out. Some will call this isolationism. I say the world is quite large enough to trade with nations of similar living standards alone. But the kleptocrats will raise hell because exploiting an equal nation is not as easy as some third world one. The US would be better served in the end by helping nations like Mexico rise to a level where some sort of balance of trade could be effected. Not by the current situation, where a few corporations profit at the expense of the US taxpayer, who must fund the indirect cost of their "cheap" goods and labor. Costs like the need for global US military muscle, social welfare programs for immigrant labor, etc.

[vinoveri]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

Sure, it can be done but the reason isn't due to an act of God or Nature, it is due to the actions of banksters.

Agreed, but we should not overlook that this action is with the complicity of Government via cooperation and collaboration (e.g., Fed Reserve Act, Fannie, Freddie, Sallie Mae, repeal of Glass Steagall, regulatory capture and all the rest).

Do any of us ever get to vote for the members of the Fed Reserve Board, Sec of the Treasury, SEC, CFTC, FDIC chairman?
We get to vote once every 4 years for 1 of 2 candidates, each funded and sympathetic to FIRE, the winner then appointing each of the above. We not only get the government we deserve, we get the only government available anymore.

[sunskyfan]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

FIRE is the current icon representing invalid capital searching for validation. In the current world system capital is formed first and then looks to attach to objects of validity. It has nothing to do with innovation, production, or service. There have been and are places where the cost of labor is so low that it competes one to one with this phenomena. The US in the Fifties and Sixties. Japan in the Seventies and Early Eighties. China now. But this is unsustainable. During those times there seems to be a balance but as the capital formation starts to become exponential relative to production it becomes the dominating force in the economy. During the good times of balance even middle class people believe they can buffer wealth into retirement and some can but most cannot. I think the thing that has not been realized fully is that the invalid capital not only attached itself to Real Estate but also to Stock, Bonds, and "retirement" savings in general. Anything that can be named has a note attached to it now and has been sold and resold as a process of increased validity to reduce risk. This kills money. Maybe a better term for it would be "Dead Money". Imagine a casino where the house issues insurance against loosing as long as the players don't play with a certain percentage of chips in their pocket but the bet minimums are slowly raised. That insurance is retirement and as the world economy is raising the bet minimums the economy is coming to a halt. Only when we see people let go of the idea of retirement will the economy become vital again. This, unfortunately, will probably require a collapse.

Again, the common denominator in all of this is that risk is conserved and if it is reduced somewhere it must be increased somewhere else. When people think about retirement and investment in businesses that support them that makes sense but collective retirement concepts are a scam that eventually kill the economy. They do for a short time create pools of capital but they also create unsupportable expectations pure and simple. I wish it weren't true but I wish I could fly by flapping my arms too .

[don]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

Let's see. If you start saving at 25 and retire at 65 and live to 85 and you want to live at the standard of living you have when you are 65 for that final 20 years you have to store at least 50% of your income from 40 years to give you that last 20 years. Probably more like 65% since you earn much less at 30 that at 55. Unless you can exploit others productivity either via taxes or lower foreign wages you just can't get there. Sure, there are productivity gains but there is also a loss due to a larger medical footprint as you get older. The retirement myth for the general population seems pretty obvious to me.

The benefits for FIRE are not a myth, however

Keep a rollin', rollin', rollin' ....

[charliebrown]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

being a value investor, I don't know the answer to your question.
At this point stocks are expensive based upon shiller p/e and divided yield
bonds are expensive based upon historically low yields,
cash/mm pays a negative real return, compared to the CPI or worse yet PPI.
commodities are near all time high.
gold and silver have pulled back a bit, but seeing that you don't have many years
until you are retired, this is a dangerous game too. I can see gold pulling back to 1200. Can you afford to lose
10-20% of your savings, especially if retired and relying upon this position for cash flow or having to draw down
to cover living expenses?

Good luck I feel for you.
Right now you might want to consider an Ally bank account or Amex bank account paying 1%+
Sorry to all of you who feel Ally is the evil empire.

[shiny!]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

being a value investor, I don't know the answer to your question.
At this point stocks are expensive based upon shiller p/e and divided yield
bonds are expensive based upon historically low yields,
cash/mm pays a negative real return, compared to the CPI or worse yet PPI.
commodities are near all time high.
gold and silver have pulled back a bit, but seeing that you don't have many years
until you are retired, this is a dangerous game too. I can see gold pulling back to 1200. Can you afford to lose
10-20% of your savings, especially if retired and relying upon this position for cash flow or having to draw down
to cover living expenses?

Thanks charliebrown. This is how things look to me, too. Hopefully when certain commodities we hold near a top some other asset classes, perhaps stocks, will be at their lows. Then I can switch asset classes for the next phase of the cycle. Buy low, sell high, rinse and repeat...

Another option is to sell at the high (unless we already had the high in which case I blew it), take the money and move to another country with a lower cost of living like India.

Good luck I feel for you.
Right now you might want to consider an Ally bank account or Amex bank account paying 1%+
Sorry to all of you who feel Ally is the evil empire.

I guess I'm more fearful than you, but right now I don't trust banks to hold more than a small amount of my money.

[charliebrown]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

as long as you have under 250k you should be ok.
If you believe the reported numbers both Ally and Amex have healthy balance sheets.
I'm not sure I believe them whole-heartedly, but you have to believe something.
Believe me I do sleep with one eye open at night having my money in a bank.


I don't think the gvt is going to let FDIC go under.
If they do it is game over.
It would be a run on the banking system.
They will print any amount to save the depositors from a nominal loss.
If the banks go under all rules are off.

I have been writing covered calls on deep value stocks for around 7% apr.
It is hard though, a lot of management, rolling your calls, waiting for an entry point.
It is a job in itself.

[c1ue]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

They will print any amount to save the depositors from a nominal loss.

Not quite correct.

They will print any amount to save the depositorsbanksters from a nominal loss.

[jiimbergin]

Re: Lifetime Saving for Retirement a Sham! Say It Ain't So ....

as long as you have under 250k you should be ok.
If you believe the reported numbers both Ally and Amex have healthy balance sheets.
I'm not sure I believe them whole-heartedly, but you have to believe something.
Believe me I do sleep with one eye open at night having my money in a bank.


I don't think the gvt is going to let FDIC go under.
If they do it is game over.
It would be a run on the banking system.
They will print any amount to save the depositors from a nominal loss.
If the banks go under all rules are off.

I have been writing covered calls on deep value stocks for around 7% apr.
It is hard though, a lot of management, rolling your calls, waiting for an entry point.
It is a job in itself.

Since I do believe gold and silver will ultimately rise in price from here, I sell covered calls on GLD and SLV.