Showing posts with label Coming. Show all posts
Showing posts with label Coming. Show all posts

Tuesday, February 25, 2014

22 Facts About The Coming US Demographic Shock Wave

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Submitted by Michael Snyder of The Economic Collapse blog,

Today, more than 10,000 Baby Boomers will retire.  This is going to happen day after day, month after month, year after year until 2030.  It is the greatest demographic tsunami in the history of the United States, and we are woefully unprepared for it.  We have made financial promises to the Baby Boomers worth tens of trillions of dollars that we simply are not going to be able to keep.  Even if we didn't have all of the other massive economic problems that we are currently dealing with, this retirement crisis would be enough to destroy our economy all by itself.  During the first half of this century, the number of senior citizens in the United States is being projected to more than double.  As a nation, we are already drowning in debt.  So where in the world are we going to get the money to take care of all of these elderly people?

The Baby Boomer generation is so massive that it has fundamentally changed America with each stage that it has gone through.  When the Baby Boomers were young, sales of diapers and toys absolutely skyrocketed.  When they became young adults, they pioneered social changes that permanently altered our society.  Much of the time, these changes were for the worse.

According to the New York Post, overall household spending peaks when we reach the age of 46.  And guess what year the peak of the Baby Boom generation reached that age?...

People tend, for instance, to buy houses at about the same age — age 31 or so. Around age 53 is when people tend to buy their luxury cars — after the kids have finished college, before old age sets in. Demographics can even tell us when your household spending on potato chips is likely to peak — when the head of it is about 42.

Ultimately the size of the US economy is simply the total of what we’re all spending. Overall household spending hits a high when we’re about 46. So the peak of the Baby Boom (1961) plus 46 suggests that a high point in the US economy should be about 2007, with a long, slow decline to follow for years to come.

And according to that same article, the Congressional Budget Office is also projecting that an aging population will lead to diminished economic growth in the years ahead...

Lost in the discussion of this week’s Congressional Budget Office report (which said 2.5 million fewer Americans would be working because of Obamacare) was its prediction that aging will be a major drag on growth: “Beyond 2017,” said the report, “CBO expects that economic growth will diminish to a pace that is well below the average seen over the past several decades [due in large part to] slower growth in the labor force because of the aging of the population.”

So we have a problem.  Our population is rapidly aging, and an immense amount of economic resources is going to be required to care for them all.

Unfortunately, this is happening at a time when our economy is steadily declining.

The following are some of the hard numbers about the demographic tsunami which is now beginning to overtake us...

1. Right now, there are somewhere around 40 million senior citizens in the United States.  By 2050 that number is projected to skyrocket to 89 million.

2. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

3. One poll discovered that 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.

4. According to a survey conducted by the Employee Benefit Research Institute, "60 percent of American workers said the total value of their savings and investments is less than $25,000".

5. 67 percent of all American workers believe that they "are a little or a lot behind schedule on saving for retirement".

6. A study conducted by Boston College's Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.

7. Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.

8. According to one recent survey, 70 percent of all American workers expect to continue working once they are "retired".

9. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

10. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

11. Today, only 10 percent of private companies in the U.S. provide guaranteed lifelong pensions for their employees.

12. According to Northwestern University Professor John Rauh, the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.

13. Right now, the American people spend approximately 2.8 trillion dollars on health care, and it is being projected that due to our aging population health care spending will rise to an astounding 4.5 trillion dollars in 2019.

14. Incredibly, the United States spends more on health care than China, Japan, Germany, France, the U.K., Italy, Canada, Brazil, Spain and Australia combined.

15. If the U.S. health care system was a country, it would be the 6th largest economy on the entire planet.

16. When Medicare was first established, we were told that it would cost about $12 billion a year by the time 1990 rolled around.  Instead, the federal government ended up spending $110 billion on the program in 1990, and the federal government spent approximately $600 billion on the program in 2013.

17. It is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.

18. At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for every single household in the United States.

19. In 1945, there were 42 workers for every retiree receiving Social Security benefits.  Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.

20. Right now, there are approximately 63 million Americans collecting Social Security benefits.  By 2035, that number is projected to soar to an astounding 91 million.

21. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

22. The U.S. government is facing a total of 222 trillion dollars in unfunded liabilities during the years ahead.  Social Security and Medicare make up the bulk of that.

So where are we going to get the money?

That is a very good question.

The generations following the Baby Boomers are going to have to try to figure out a way to navigate this crisis.  The bright future that they were supposed to have has been destroyed by our foolishness and our reckless accumulation of debt.

But do they actually deserve a "bright future"?  Perhaps they deserve to spend their years slaving away to support previous generations during their golden years.  Young people today tend to be extremely greedy, self-centered and lacking in compassion.  They start blogs with titles such as "Selfies With Homeless People".  Here is one example from that blog...

Selfies With Homeless People

Of course not all young people are like that.  Some are shining examples of what young Americans should be.

Unfortunately, those that are on the right path are a relatively small minority.

In the end, it is our choices that define us, and ultimately America may get exactly what it deserves.

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Friday, February 21, 2014

Japan Machine Orders Crumble At Fastest Pace In 22 Years As BOJ Board Member Warns More QE May Not Be Coming

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If you needed another reason to buy stocks, trust in the growth meme, and have your faith in Abenomics confirmed... look away. Japanese Machine orders for December just printed -15.7% in December - the biggest MoM plunge since 1992. This is the biggest miss to expectations since 2006 and what is considerably more problematic for Abe et al. is that YoY expectations of a core machine order rise of 17.4% was hopelessly missed with a small 6.7% gain (and this is data that excludes more volatile orders).

As Bloomberg notes, core machine orders are an indicator of future capital expenditure and it seems, just as in the US, that thanks to "stocks" now being considered central bank policy tools that capex no longer means productive capital use... it means buybacks, dividends, and shareholder recaps in any which way we can. How was the weather in Japan in December?

But while collapsing machine orders are "completely irrelevant", even if a plunge of this magnitude usually portends a recession, what should be far more troubling to the Kool aid addicts is if the BOJ were to announce that just like the Fed, it too is tapering its Open-ended QE ambitions. Considering this is precisely what BOJ board member Kiuchi just did, that relentless USDJPY meltup overnight may not be such a slamdunk.

From Market News...

Bank of Japan board member Takahide Kiuchi, who is against a rigid two-year timeframe for achieving 2% inflation, said side-effects of an additional easing would be bigger than its positive effects if the economy were deviating only slightly downward from the BOJ's recovery scenario, the Nikkei reported. Kiuchi, a former Nomura Securities economist, told the daily in an interview that it is difficult to predict how much a further easing would push up consumer prices, and that wages should rise in line with price gains.

He also said the BOJ "should make a cautious decision as to whether to continue or scale back" the current aggressive easing at the end of the target period to hit stable 2% inflation in about two years from April 2013.

No Panic yet but JPY and NKY are fading...

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Sunday, December 15, 2013

FOMC Minutes Reveal Taper Likely In "Coming Months"

aWith the schizophrenia that seems to have availed across the FOMC members (hawks are doves, doves are hawks, tapering is not tightening, etc.) it is not surprising that the minutes reflect some confusion:*FOMC SAW `SEVERAL SIGNIFICANT RISKS' REMAINING FOR ECONOMY *FED TAPER LIKELY IN COMING MONTHS ON BETTER DATA, MINUTES SHOW*METLIFE FOUNDATION, SESAME WORKSHOP PARTNER TO PROVIDE FINL*FOMC SAW DOWNSIDE RISKS TO ECONOMY, LABOR MARKET `DIMINISHED'*FOMC SAW CONSUMER SENTIMENT REMAINING `UNUSUALLY LOW'*FOMC SAW RECOVERY IN HOUSING AS HAVING `SLOWED SOMEWHAT'So summing up - when we get to an unknown point in the future with an unknown state of parameters, we may do an unknown amount of tapering - maybe possibly. Pre-Minutes: SPX 1791, 10Y 2.75, EUR 1.3444, Gold $1262Key sections: on taper in coming months as well as a Taper even if there is no economic improvement:During this general discussion of policy strategy and tactics, participants reviewed issues specific to the Committee’s asset purchase program. They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in la-bor market conditions and would thus warrant trim-ming the pace of purchases in coming months. However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent.on the calendar scheduling of the taper:Participants generally expressed reservations about the possibility of introducing a simple mechanical rule that would adjust the pace of asset purchases automatically based on a single variable such as the unemployment rate or payroll employment. While some were open to considering such a rule, others viewed that approach as unlikely to reliably produce appropriate policy out-comes. As an alternative, some participants mentioned that it might be preferable to adopt an even simpler plan and announce a total size of remaining purchases or a timetable for winding down the program. A calendar-based step-down would run counter to the data-dependent, state-contingent nature of the current asset purchase program, but it would be easier to communicate and might help the public separate the Committee’s purchase program from its policy for the federal funds rate and the overall stance of policy. With regard to future reductions in asset purchases, participants discussed how those might be split across asset classes. A number of participants believed that making roughly equal adjustments to purchases of Treasury securities and MBS would be appropriate and relatively straightforward to communicate to the public. However, some others indicated that they could back trimming the pace of Treasury purchases more rapidly than those of MBS, perhaps to signal an intention to support mortgage markets, and one participant thought that trimming MBS first would reduce the potential for distortions in credit allocation.on lowering the IOER:Participants also discussed a range of possible actions that could be considered if the Committee wished to signal its intention to keep short-term rates low or rein-force the forward guidance on the federal funds rate. For example, most participants thought that a reduc-tion by the Board of Governors in the interest rate paid on excess reserves could be worth considering at some stage, although the benefits of such a step were generally seen as likely to be small except possibly as a signal of policy intentions. By contrast, participants expressed a range of concerns about using open market operations aimed at affecting the expected path of short-term interest rates, such as a standing purchase facility for shorter-term Treasury securities or the pro-vision of term funding through repurchase agreements. Among the concerns voiced was that such operations would inhibit price discovery and remove valuable sources of market information; in addition, such operations might be difficult to explain to the public, complicate the Committee’s communications, and appear inconsistent with the economic thresholds for the fed-eral funds rate. Nevertheless, a number of participants noted that such operations were worthy of further study or saw them as potentially helpful in some cir-cumstances.On lowering the 6.5% unemployment rate threshold:As part of the planning discussion, participants also examined several possibilities for clarifying or strength-ening the forward guidance for the federal funds rate, including by providing additional information about the likely path of the rate either after one of the economic thresholds in the current guidance was reached or after the funds rate target was eventually raised from its cur-rent, exceptionally low level. A couple of participants favored simply reducing the 6½ percent unemployment rate threshold, but others noted that such a change might raise concerns about the durability of the Com-mittee’s commitment to the thresholds. Participants also weighed the merits of stating that, even after the unemployment rate dropped below 6½ percent, the target for the federal funds rate would not be raised so long as the inflation rate was projected to run below a given level. In general, the benefits of adding this kind of quantitative floor for inflation were viewed as uncer-tain and likely to be rather modest, and communicating it could present challenges, but a few participants re-mained favorably inclined toward it. Several partici-pants concluded that providing additional qualitative information on the Committee’s intentions regarding the federal funds rate after the unemployment thresh-old was reached could be more helpful. Such guidance could indicate the range of information that the Com-mittee would consider in evaluating when it would be appropriate to raise the federal funds rate. Alternative-ly, the policy statement could indicate that even after the first increase in the federal funds rate target, the Committee anticipated keeping the rate below its longer-run equilibrium value for some time, as eco-nomic headwinds were likely to diminish only slowly.Full minutes (pdf)Average: Your rating: None Average: 4 (1 vote)