By Katy Barnato at cnbc.com:
Dreams of lengthy cruises and beach life may be just that, with 20 of the world’s biggest countries facing a pension shortfall worth $78 trillion, Citi said in a report sent on Wednesday.
“Social security systems, national pension plans, private sector pensions, and individual retirement accounts are unfunded or underfunded across the globe,” pensions and insurance analysts at the bank said in the report.
“Government services, corporate profits, or retirement benefits themselves will have to be reduced to make any part of the system work. This poses an enormous challenge to employers, employees, and policymakers all over the world.”
The total value of unfunded or underfunded government pension liabilities for 20 countries belonging to the Organisation for Economic Co-operation and Development (OECD) — a group of largely wealthy countries — is $78 trillion, Citi said. (The countries studied include the U.K., France and Germany, plus several others in western and central Europe, the U.S., Japan, Canada, and Australia.)
To continue reading: Rich countries have a $78 trillion pension problem
Obviously, Robert, this column and the preceding one (from Jacob Hornberger about US National Debt) are two sides of the same IOU-coin.
What do you think of my view that debt issuance (credit growth) on this scale does two things:
1. It creates the illusion that wealth can be consumed (by paying armies of people to do stuff that a true market would never sustain) while the holders of the IOU’s (bondholders) believe they still have the wealth.
2. By doing #1, it encourages a society-wide orgy of capital consumption, because instead of a natural split between capital formation/capital maintenance and consumption, the “have my cake and eat it too” places an illusion of capital on one side of the scale, so people in society drastically increase consumption.
My conclusion is that monetary debasement skewed people’s “mental accounting” of conditions, reinforcing a vast, collective rationalization for policies that as a whole look like our society is an 18-year-old sailor on shore leave, turned loose in a whorehouse with a (seemingly) no-limit charge card.
This explains how the USA instituted policies that packed up and shipped entire industries to foreign lands, and how mercantilist foreign nations bulldozed vast tracts of land to build factories catering to overconsumption on a level no sane person could imagine.
Here’s my point: If this all is true, then the intermediate effects are as follows:
A. Tens of millions of people (or it could be billions, if the ripple effects across the world are as large as they could be) have invested vast sums of money and time into obtaining training and experience for occupations that have many times the actual, underlying demand that should exist absent the warping effects of overconsumption. The poster child for this is everything medical, because we know that medical spending in the USA far outstrips that even in command economies. There are far too many doctors, nurses, pharmacists, physical therapists and everyone one the food chain that feeds into them, from drug companies and device makers to imaging companies and diagnostics.
B. Entire industries now exist for which, absent the kid-in-the-whorehouse spending, would never have occurred, or occurred at a tiny fraction of the size they are now. We have no idea what industries will literally wink out of existence when this orgy of overspending finally exhausts itself.
C. The wealth represented by tens, or hundreds, or a thousand billion dollars of IOU’s is currently warping political systems like never before. Borrowers (in the form of lawmakers, executives, etc.) are in thrall of debt-holders, and debt-holders are reaching right through politicians to directly pull the levers that change the rules of society. This is quietly creating a sense that ostensibly “free” countries in the West are becoming overt oligarchies, and the term “neo-feudalism” is a reasonable label for this. Political power is wholly unaccountable, and political systems are lurching dangerously away from the shared values that sustain peaceful polities.
Seen from a distance, we know this all cannot go on. But it has sustained far beyond logic and reason. It is very much like the band plays and the passengers continue to dance, even as the icy waters of the North Atlantic creep up the tilting deck to wet the dancers’ feet.
Such is the mighty capability of people to rationalize their irrational beliefs. When the smartest men among us apply themselves to explaining folly with such elegant sophistry that up can be sold as down, we cannot know in advance how far our society can steam into Fantasy Land.
I was wrong with my earlier analogy. We are not sailing into uncharted waters without navigation aids. We are adrift in a three-dimensional fantasy, a dreamland where all is gain, none is pain, and if the party begins to wane then the cure is “more Soma!” Like a man experiencing a pleasant, even ecstatic dream may struggle to avoid wakefulness, our society (our very civilization) resists consciousness even as cognitive dissonance grows to be a deafening alarm clock.
Will this dream lead to sober wakefulness? Or will it transition directly past sobriety and straight into nightmare?
I would say that we are making the same points in different ways. We are living in a time of maximum, and completely unsustainable, delusion, and I agree with you that the icy waters of the North Atlantic are lapping over the dancers’ feet. Centuries hence, historians will look back at this time, shake their heads, and write cautionary tomes.