Let Them... Keep Working
Revolt in France and the problem with cradle to grave Ponzi schemes...
Bill Bonner, reckoning today from Youghal, Ireland...
Since the creation of the Fed, the dollar has lost 97% of its purchasing power. This more than one-hundred year trend is something you ignore at your own risk.
~ John Dienner
We were in France last week. The big issue there is pension reform. Everybody talks about it. Everyone has an opinion. The Macron government wants to raise the retirement age, generally, from 62 to 64. The idea is to ‘save the system.’
The French took to the streets in protest. Many of the protestors were so young, they had barely entered the system. It probably wasn’t the pension reform itself that got them riled up, but the idea that the government mightn’t take care of them, cradle to grave. We have machines to do the physical work – and immigrants to operate them. And now AI can do the thinking, right? Many young people must wonder why they have to work at all.
Most western countries are in the same boat. Fewer people working. More people retired. All of these programs were set up as variations of Ponzi schemes, where the first to get in would do very well. Later, the systems would run out of money.
Tough Choices
What to do? There are only three possible solutions – raise taxes, lower payments to retirees, or raise the age of retirement. The Macron team chose the third option.
Points of view on it fall into two broad categories, pro and con.
For an introduction to the ‘con’ side of the argument, we turn to one of our favorite columnists, J. Neilson, who writes, in English, for the Buenos Aires Times:
By the time men and women now in their 20s reach 64, they will live in a society which will be as different from the one they grew up in as today’s is from those of the final decades of the 20th century, when for every retiree there were over two workers who contributed to the system. In France there are now less than 1.7 and their number is rapidly dwindling.
Unsurprisingly, many feel let down by their political leaders who – like their counterparts throughout the democratic world – pretend they have “solutions” to the problems which are besetting voters but rarely manage to make things better.
The alluring sales pitch behind public pension schemes was that the typical contributor would get more out than he put in. That was the case for many years. But now, with fewer young people entering the system…and growth rates falling…politicians can still promise. But they can’t deliver. So, the ‘con’ argument is very simple; like it or not, the benefits must be scaled back. At the very least, tough choices will have to be made.
Unjust and Unaffordable
But wait. The other side of the retirement debate was taken up this weekend by Simon Kuper in the Financial Times. Mr. Kuper is reliably on the wrong side of almost all issues, so we can assume that he is wrong again.
“The French have led the world in creating a glorious new life-stage,” he writes: “the first decade of retirement.”
Can’t afford it? Nonsense. “Their system remains just about affordable. Everyone ought to learn from them.”
The typical Frenchman can now retire at 62 and enjoy another 20 years of life. The first 10 years of it should be great, he says, as retirees’ health initially improves (perhaps because they have more time to exercise?)…and…
“French pensioners enjoy higher median living standards than working people,” writes Kuper, “if you take into account the fact that retirees typically aren’t funding children or mortgages.”
How to stop the losses in the French pension system? Mr. Kuper:
“Make the top 10 percent of earners work until, say 67. Since they are the highest taxpayers, that should help replenish the system. Let ordinary people have fun while they still can.”
The Last to Go
Which would you favor, dear reader – pro or con? Set the retirement age at 60…70…75? Make the rich work longer so the not-so-rich can frolic at 60?
What fun it must be to organize the lives of others – millions of them. Tell them when they should work…and when they should rest? Sure, why not?
But wait… Is retirement anyone’s business but your own?
Of course it is! In the modern world, pension systems are collectivized…and compulsory. And now that they have become hard to finance, we can expect to see more cuts, more compromises, and more claptrap. Government budgets are limited. So, if you want to retire at 62, for example, you might have to give up other great government programs…such as windmills, welfare, weapons or war.
Given the choice, the common citizen would readily take pension and medical benefits, and give the rest the heave-ho. But he doesn’t run the government. The elite do. And since the elite get their grift money from welfare and warfare boondoggles, where the dollars can dissolve into corporate profits, think tank financing, speaking fees and sinecures…they’ll be the last to go.
Pensions, which go to ‘The People,’ will have to be reduced.
Regards,
Bill Bonner
A little over one year ago, I joined one of the progressive forums on Substack. Why? I figured that since the progressives control most of the Democratic Party agenda, monitoring their thought processes, as noted in the forum's comments section, might provide me a "heads up" on where things were heading in the Biden administration. I learned a lot! They re much more "open" about their goals when discussing them amongst themselves.
The progressives have two main enemies that they hate, rich people and corporations. The rich and corporations control the government through their lackeys, the Republicans. To the progressives, all the actions of the rich, corporations, and Republicans are evil. The rich obtained their wealth undeservingly by inheritance or by corrupt means. Corporations are driven by greed and are akin to a plantation of the Old South with the CEO as the "master" and the workers as the "slaves". The Republicans are stupid anti-democratic Putin-loving insurrectionists and should disbanded and jailed. This worldview drives their agenda (and the Democratic party agenda) and their solutions to our problems.
Foe example, inflation is caused by corporate greed. Corporations have too much power to raise prices as they wish while holding down the wages of workers. The progressive solution: impose a windfall tax on "excess" corporate profits, impose price controls on some products, use antitrust to breakup large corporations, strongly encourage workers to form unions, and have the Fed keep interest rates low. The problem of the rich is solved by eliminated them ("no one needs all that money") with confiscatory marginal tax rates of 75% or more ("it was 90% when Ike was president"). Their solution to the "pension problems" mention by Bill? Simple. Lower the retirement age, increase benefits, and have the rich pay for it!
Needless to say, the progressive solutions would be disastrous to the US! Sorry for the lengthy comment, just had to spill my guts! My two cents...
Ah, yes, it’s a knotty problem, how to control the masses. Pensions, Universal Basic Income, Taxes, Consumption incentives and dis-incentives, Federal and State regulations, Executive orders ..... It is all just a bit too messy. How much simpler if the government just owned and controlled the money - all of it.