Financial fuckery thread

[Disco Pickle]

I was just discussing something with my old boss (who's now in a different position here) about how he and the guys he's worked with and around for the last 30 years are looking at the current state of things, their own positions and plans for retirement, their ability to fund their retirement.  They're looking at it and deciding not to retire when people their age would have historically.  They're staying in their jobs and holding onto them any way they can.  These are industry professionals, guys who've been in their field since their 20's.  Engineers, Electricians, Plant Managers and the like.

It occurred to me that this one simple thing, that the largest generation of people in the work force, the baby boomers, deciding not to retire "on time" can be a potential catastrophic ripple for the next 20 years.

If the boomers are systematically delaying their retirement from these jobs then no new positions are opening up to the people who came in after them.  There is no upward mobility in these major and minor industry jobs.  The guy who came in as an apprentice 10 or 20 years ago will stay there for another 20 and his position will not be vacant for a younger person, out of college, to move into.

In a boom time this would not likely be as much of a problem.  New companies would sprout up in answer to demand for employment, products, services, know-how and competition in pricing and delivery.  

It's most certainly NOT a boom time, but a recession with no hope on the horizon of it abating anytime soon, combined with the boomers retirement decade beginning.  I think that one thing, the decision not to retire for another 10 years or until their health prevents them from working will have a major effect on when we're able to pull the nose of this plane back to a level horizon.

Thoughts on this are more than welcome.  I hadn't really considered it before he brought it up.  My thoughts were always toward the drain that will happen when the greatest generation DOES retire and pull their money from the markets and begin collection SS en mass.  After some consideration, I believe this would produce the worse of the two outcomes.

[Cain]

I actually read something about this the other day.  It was from someone who had been planning on retiring, but because his pension plan had been gambled away by...well, someone, he wouldn't be able to live on what he was going to actually get, and so had decided to stay on and work for a few more years.

And he said the consequences would be exactly the same as you outlined.  No upward mobility in jobs, less vacant positions and, when they do retire, due to the demographics and the current economic crisis, a huge strain on government resources. 

It's a depressing thought.  I'm just glad I've escaped all that, for now, and finally landed on my feet.  Many others will not be so lucky.

[Adios]

And at the same time the right wingers claim that all the retiring Boomers will overload the Social Security system and that because of this it should be shut down.

[Disco Pickle]

And at the same time the right wingers claim that all the retiring Boomers will overload the Social Security system and that because of this it should be shut down.

And the left wingers are in denial that it can be kept liquid throughout the next 30 years while still increasing the amount paid out per person.

It's clear SOMETHING has to be done, and that something should not include, IMO, pushing the tax burden onto the current generations of workers.  We're strapped as it is, the ones of us who HAVE jobs and are holding onto them with two hands and our teeth.

[Adios]

And at the same time the right wingers claim that all the retiring Boomers will overload the Social Security system and that because of this it should be shut down.

And the left wingers are in denial that it can be kept liquid throughout the next 30 years while still increasing the amount paid out per person.

It's clear SOMETHING has to be done, and that something should not include, IMO, pushing the tax burden onto the current generations of workers.  We're strapped as it is, the ones of us who HAVE jobs and are holding onto them with two hands and our teeth.

I don't know that this discussion belongs in this thread, but I will be happy to discuss it with you in another thread.

[Disco Pickle]

And at the same time the right wingers claim that all the retiring Boomers will overload the Social Security system and that because of this it should be shut down.

And the left wingers are in denial that it can be kept liquid throughout the next 30 years while still increasing the amount paid out per person.

It's clear SOMETHING has to be done, and that something should not include, IMO, pushing the tax burden onto the current generations of workers.  We're strapped as it is, the ones of us who HAVE jobs and are holding onto them with two hands and our teeth.

I don't know that this discussion belongs in this thread, but I will be happy to discuss it with you in another thread.

Yeah I was actually going to write a foot note to that post along the lines of not wanting to muck up the thread in a SS discussion with you.  I'd be interested to hear your thoughts on it.  Not sure where though or how much time I can spend today talking about it.  I'm a bit swamped at the moment and have about filled up my "fuck off online" tank for the day.

[Adios]

The American banking sector apparently is going to be vastly different when it finally emerges from the financial crisis that took hold more than three years ago. It is going to be significantly smaller, and the domination of a relative handful of behemoth institutions is going to increase.

At the end of June, there were 7,522 commercial banks, down from 8,542 on Dec. 31, 2007. That is a decline of nearly 12 percent in just three and a half years. Of the more than 1,000 banks that disappeared, about 370 failed. But the rest of the decrease came through mergers and acquisitions as a decades-long pattern of consolidation continued.

Most banks in the United States still are fairly small. The median size of a bank at the end of June, according to an analysis of statistics from the Federal Deposit Insurance Corp. was about $155 million in assets. That's about an 18 percent increase since the end of 2007.

But those numbers seriously skew the nature of the industry. Of the more than $13.6 trillion in assets held by banks at the end of June, nearly $9.4 trillion is in the hands of just 37 institutions, each with more than $50 billion in assets. And of that, $5.5 trillion is held by just four banks: JPMorgan Chase, Bank of America, Citibank and Wells Fargo. Each of those have more than $1 trillion in assets. In other words, the U.S. banking industry resembles a tall cake, with a very thick layer of icing on top.

http://www.msnbc.msn.com/id/44426180/ns/business-stocks_and_economy/#.Tmjbi-zlhQ0



Well this isn't good at all. That is an immense amount of power in the hands of very few.

[Cain]

Bloomberg is reporting that Standard & Poors is giving subprime mortgages a AAA rating...in other words, the junk loans which helped cause the financial crisis are, according to S&P, a better investment than US government bonds 

[Adios]

Bloomberg is reporting that Standard & Poors is giving subprime mortgages a AAA rating...in other words, the junk loans which helped cause the financial crisis are, according to S&P, a better investment than US government bonds 

Isn't that a case of them protecting their own?

[Cain]

It shows S&P's calculators are fucked up.

Also, this is depressing

http://www.project-syndicate.org/commentary/roubini41/English

Nor could monetary policy help very much. Quantitative easing is constrained by above-target inflation in the eurozone and UK. The US Federal Reserve will likely start a third round of quantitative easing (QE3), but it will be too little too late. Last year's $600 billion QE2 and $1 trillion in tax cuts and transfers delivered growth of barely 3% for one quarter. Then growth slumped to below 1% in the first half of 2011. QE3 will be much smaller, and will do much less to reflate asset prices and restore growth.

Currency depreciation is not a feasible option for all advanced economies: they all need a weaker currency and better trade balance to restore growth, but they all cannot have it at the same time. So relying on exchange rates to influence trade balances is a zero-sum game. Currency wars are thus on the horizon, with Japan and Switzerland engaging in early battles to weaken their exchange rates. Others will soon follow.

Race

to

the

bottom

[Adios]

It shows S&P's calculators are fucked up.

Also, this is depressing

http://www.project-syndicate.org/commentary/roubini41/English

Nor could monetary policy help very much. Quantitative easing is constrained by above-target inflation in the eurozone and UK. The US Federal Reserve will likely start a third round of quantitative easing (QE3), but it will be too little too late. Last year's $600 billion QE2 and $1 trillion in tax cuts and transfers delivered growth of barely 3% for one quarter. Then growth slumped to below 1% in the first half of 2011. QE3 will be much smaller, and will do much less to reflate asset prices and restore growth.

Currency depreciation is not a feasible option for all advanced economies: they all need a weaker currency and better trade balance to restore growth, but they all cannot have it at the same time. So relying on exchange rates to influence trade balances is a zero-sum game. Currency wars are thus on the horizon, with Japan and Switzerland engaging in early battles to weaken their exchange rates. Others will soon follow.

Race

to

the

bottom

Like an elevator in a 30 story free fall.

[Disco Pickle]

It shows S&P's calculators are fucked up.

Also, this is depressing

http://www.project-syndicate.org/commentary/roubini41/English

Nor could monetary policy help very much. Quantitative easing is constrained by above-target inflation in the eurozone and UK. The US Federal Reserve will likely start a third round of quantitative easing (QE3), but it will be too little too late. Last year's $600 billion QE2 and $1 trillion in tax cuts and transfers delivered growth of barely 3% for one quarter. Then growth slumped to below 1% in the first half of 2011. QE3 will be much smaller, and will do much less to reflate asset prices and restore growth.

Currency depreciation is not a feasible option for all advanced economies: they all need a weaker currency and better trade balance to restore growth, but they all cannot have it at the same time. So relying on exchange rates to influence trade balances is a zero-sum game. Currency wars are thus on the horizon, with Japan and Switzerland engaging in early battles to weaken their exchange rates. Others will soon follow.

Race

to

the

bottom

While the reasons he gives for depreciation not being feasible are spot on and currency wars have been in the making for some time, deflation is still exactly the bitter pill the we are going to have to swallow before we'll ever dig out of this.

The idea that deflation is to always be avoided, even at the cost of artificial inflation is, IMO, a seriously flawed monetary policy position. 

Of course, wages would have to remain level but since wages have never even come close to matching the inflation created since Bretton-Woods fell apart I'd say a healthy bout of deflation to return property value and commodities back to prices that are realistically within range of your average person being able to purchase them can only be for the good as you'll see the surplus housing begin to be bought up and people re-enter the market because of the buying power they'll see return to their monthly balance sheet.

[Cain]

Agreed.  It's the currency war aspect that worries me most...that has a potential to get out of hand very quickly.  A good bout of deflation certainly will help, so long as wages relatively rise against it, but I can just see someone deciding to go overboard with it and ruining the whole system for everyone.

Probably Germany, the way things are going.  Fucking Germans.

[Disco Pickle]

Agreed.  It's the currency war aspect that worries me most...that has a potential to get out of hand very quickly.  A good bout of deflation certainly will help, so long as wages relatively rise against it, but I can just see someone deciding to go overboard with it and ruining the whole system for everyone.

Probably Germany, the way things are going.  Fucking Germans.

Pickle: only 2 generations removed from Prussia.

But regarding that possibility, with what is already a very hot economy and discussions about abandoning the Euro, they'd start seeing white hot inflation worse than China is seeing and be forced to cool it with interest rates and deflation of their own or see their own (potential) currency begin to resemble Weimar's. 

That'd learn 'em. 


Maybe.

[Cain]

Given Germany's atrocious step backwards in race relations recently, I would say Germany is determined not to heed the lessons of the 1920s, on any level.