Global financial system implosion begins
- Thread starter Falcon
- Start date
ska invita
back on the other side
can i ask a question - the critical 7% bond yields rate - the 7% number is seen as pivotal why? If its for the reason i think it is isnt say 5% still unsustainable?
It just seems to be a "rule of thumb" determined by historical experience by financial markets .. that governments forced to borrow at around 7% are well on the road to debt default .. I don't think it is some "special exact meltdown number". Most governments are indeed probably seriously buggered by the time they are borrowing at even 6%.
Of course this implies a government continues to run its affairs strictly to the "rules" of the crony capitalist market. As has often been pointed out recently, if governments didn't deliberately give a nod and a wink to their rich citizens (paymasters and cronies) using tax avoidance schemes they could get much more of their cash requirements directly via taxation , and could tell the Money Markets (ie, the professional money managers handling the huge amounts of cash their own super rich citizens have salted away in tax havens) to fuck off.
ska invita
back on the other side
exactly - i think crudely the percentage would need to match a projected growth rate - which considering many of the countries are in negative growth or tiny growth, even 4% seems unsustainable to me...
It's just the harsh, completely unregulated , risk assessment of the world money markets which determines at what interest rate investors (the financial professionals managing the loot of the world's superrich - but also pension funds etc) are prepared to lend to individual governments. These assessments aren't of course coldly rational, but governed by the well recognised "groupthink "and lemming-like behaviour of the markets - and assessments are grossly distorted by the "shorting" games currency and other speculators play to cause artificial distortions in markets in order to make a killing .
Once the "market" sees a country as being in a death dive they close in to finish it off like hyenas. Spain is in DEEP trouble.
And of course, conversly, despite the deepest double dip recession since the 30's , and a totally incompetent economic strategy, the "markets" quite irrationally love the UK as an investment opportunity, so the UK can borrow at extraordinarily low rates.
So it's just like business then?
The more ass you kiss, the safer you gonna be......(cos lets face it Cameron and Osborne have got to be the smoothest talking sycophants the world stage has ever seen (regardless how we see 'em))
The world's superrich (criminals, psychos, drug barons, dictators, banksters. speculators.. that sort of creature) have identified London (because we really mean just London , as a special internationalist enclave of advanced world capitalism - quite distinct from the UK as a whole) as one of their favourite bolt holes to store their loot, invest in property, educate their ghastly kids, and seriously PARTY... safe, they think, from the rising tide of revolt around the world as their capitalist system crashes and burns. They just love the way the Tories talk dirty about the need to smash all the welfare states institutions and crush the poor -- ooooohhh just feeeeel that neo liberalist crazy talk..... So the UK banking system is stuffed full of looted cash from all over the world and, despite the collapse into deep recession of the rest of the UK outside London , the "Money Market" just adores what those crazy Tory Toffs are doing , and falls over itself to lend them cheap money..
It is up to us all to work diligently to ensure that the international criminal elite who see London as a sort of cosmopolitan "Hole in the Wall Gang" hideout from the coming Megaslump, are eventually dragged to Madame Guillotine in Trafalgar Square and taught the error of their ways... they never re-offend after that !
The global shale gas bubble is starting its inevitable collapse. Shale gas became (barely) economic at $15/MBTU. It's back to $3,and the astronomical costs of extracting it and its ferocious decline rates are asserting themselves. Now companies are being forced to write down billions in fictitious reserves.
This is important. Shale gas was touted as some miraculous technology that was set to revolutionise gas production, thereby making a nonsense of Peak Oil. In fact, shale gas has been around for decades - there has been no technological breakthrough. It remains to gas production what injecting between their toes is to a heroin addict. And it is unaffordable.
So Encana has written off $1.7 billion. BG - $1.3 billion. BHP - $2.5 billion. More write-downs to come shortly.
Big Oil and Gas industry writing down billions in U.S. shale gas assets (Examiner, 29 July 2012)
This is important. Shale gas was touted as some miraculous technology that was set to revolutionise gas production, thereby making a nonsense of Peak Oil. In fact, shale gas has been around for decades - there has been no technological breakthrough. It remains to gas production what injecting between their toes is to a heroin addict. And it is unaffordable.
So Encana has written off $1.7 billion. BG - $1.3 billion. BHP - $2.5 billion. More write-downs to come shortly.
Big Oil and Gas industry writing down billions in U.S. shale gas assets (Examiner, 29 July 2012)
Divisive Cotton
Now I just have my toy soldiers
There's a chronology here of the financial crash in a PDF document: http://t.co/zHVLO0K3
Just spotted:
Top Economists: Iceland Did It Right … And Everyone Else Is Doing It Wrong
Also see:
Bank's stimulus plan has lined pockets of the rich
Top Economists: Iceland Did It Right … And Everyone Else Is Doing It Wrong
Joseph Stiglitz said:
Paul Krugman said:
Also see:
Bank's stimulus plan has lined pockets of the rich
Fascinating infographic from confused.com on the dynamics of the UK pension system.
The unfunded deficit on the UK pension system i.e. the difference between funds and funding commitments to current and future pensioners now amounts to over £146,000 per household. Wow.
The unfunded deficit on the UK pension system i.e. the difference between funds and funding commitments to current and future pensioners now amounts to over £146,000 per household. Wow.
free spirit
more tea vicar?
it's not unfunded though, it's funded by NI and Tax payments in the years in which the pensions are paid out.
only someone trying to make a biased point would give the figures on this way, otherwise you'd use a projections of pensions costs vs a projection of NI and tax receipts.
btw - that £146,000 per household figure works both ways, as in that would both be the amount each household would be expected to pay in total, as well as the amount each household would eventually expect to receive on average minus admin costs (and profit margin in the private pension sector).
only someone trying to make a biased point would give the figures on this way, otherwise you'd use a projections of pensions costs vs a projection of NI and tax receipts.
btw - that £146,000 per household figure works both ways, as in that would both be the amount each household would be expected to pay in total, as well as the amount each household would eventually expect to receive on average minus admin costs (and profit margin in the private pension sector).
love detective
there's no love too small
Falcon has never got to grasps with the fact that assets and future income streams exist - he can only think in terms of liabilities and future obligations, always in gross terms and always capitalised to present value, so that a big number in trillions appears that can then be waved around and OMGzz'd
he's been rabbiting on about this 4 trillion unfunded liability for a while now - his crap has already been shown up for what it is in these posts here, here and here on this very thread
he's been rabbiting on about this 4 trillion unfunded liability for a while now - his crap has already been shown up for what it is in these posts here, here and here on this very thread
free spirit
more tea vicar?
The problem is that it prevents any serious discussion of the actual real problem that does exist with pensions, in terms of far more people living far longer after the pension age vs proportionally less people of working age to support them.
But this is a situation that's been known about for at least the last 2 decades, I remember writing homework about it in Geography at middle school (fuck knows how it got into my geography lessons mind).
I just have always expected we'll either get fucked over for our pensions when the time comes, and/or the pension age will just keep being raised til it balances out a bit more.
Of course we could have done what Norway did and invested a good proportion of our north sea oil revenues into a sovereign wealth fund, and then we'd not have had anything to worry about, but that's not the tory way.
But this is a situation that's been known about for at least the last 2 decades, I remember writing homework about it in Geography at middle school (fuck knows how it got into my geography lessons mind).
I just have always expected we'll either get fucked over for our pensions when the time comes, and/or the pension age will just keep being raised til it balances out a bit more.
Of course we could have done what Norway did and invested a good proportion of our north sea oil revenues into a sovereign wealth fund, and then we'd not have had anything to worry about, but that's not the tory way.
Hey ho, chaps. Let's not, shall we?
Love Detective - income and future streams predicated on an assumed rate of growth certainly exist for as long as the assumed rate of growth exists. And if the rate of growth assumed does not materialise, then neither does the associated income and future stream. Or am I missing something?
Free Spirit - the pension is not funded in full by NI and Tax payments in the years in which the pensions are paid out even now, and certainly not when the ratio of worker to retiree falls even lower. Instead, the balance is presumed to be made up in the growth of stocks and bonds, in turn predicated on the growth of the economy. The fraction assumed to be made up for by future growth is referred to as the deficit, and is a function of the estimate of future growth rate.
UK Government actuaries estimate the present value of these unfunded pension liabilities at about £2.2 trillion using a social discount rate of 3.5% i.e. 1.5% social time preference, and about 2% per annum economic growth rate. Make sure you read that: even if the economy had continued to grow at its pre-2008 average of 2% per annum, the pension deficit would have been £2 trillion.
If it grew at 1%, the deficit would have been £4 trillion.
Meanwhile, the economy is contracting i.e. the deficit is >>£ 4 trillion.
Now, if you believe that the growth rate of the UK economy is going to revert to >2% on a sustained basis, then you have my apologies (and sympathies). Otherwise, you might find this helpful in correcting some misperceptions.
Love Detective - income and future streams predicated on an assumed rate of growth certainly exist for as long as the assumed rate of growth exists. And if the rate of growth assumed does not materialise, then neither does the associated income and future stream. Or am I missing something?
Free Spirit - the pension is not funded in full by NI and Tax payments in the years in which the pensions are paid out even now, and certainly not when the ratio of worker to retiree falls even lower. Instead, the balance is presumed to be made up in the growth of stocks and bonds, in turn predicated on the growth of the economy. The fraction assumed to be made up for by future growth is referred to as the deficit, and is a function of the estimate of future growth rate.
UK Government actuaries estimate the present value of these unfunded pension liabilities at about £2.2 trillion using a social discount rate of 3.5% i.e. 1.5% social time preference, and about 2% per annum economic growth rate. Make sure you read that: even if the economy had continued to grow at its pre-2008 average of 2% per annum, the pension deficit would have been £2 trillion.
If it grew at 1%, the deficit would have been £4 trillion.
Meanwhile, the economy is contracting i.e. the deficit is >>£ 4 trillion.
Now, if you believe that the growth rate of the UK economy is going to revert to >2% on a sustained basis, then you have my apologies (and sympathies). Otherwise, you might find this helpful in correcting some misperceptions.
love detective
there's no love too small
Yes, you are missing plenty, a basic knowledge of what you are talking about being the most obvious thing
you persistently refer to this 4 trillion as a 'deficit' - at best this is woefully ignorant, at worst intentionally dishonest
this figure of 4 trillion is not a deficit - a deficit would be the difference between the net present value of future pension obligations and the net present value of future income streams that are available to fund those payments. the 4 trillion represents purely one side of these numbers, i.e. the net present value of future pension obligations. if you want to talk about a deficit then you need to look at what the actual gap is, not just wave about a Gross liability figure and go omgzz. We've been through this before, either the pensions will be paid in which case the present value of future pension obligations (say 4 trillion) is matched exactly by the present value of income stream available to meet those pension obligations (i.e. 4 trillion), or those pension payments will not be paid in full, in which case the present value of future pension obligations (say 4 trillion less the amount not paid) is matched exactly by the present value of income stream available to meet those pension obligations (i.e. 4 trillion less the value of the amount not paid),
As has been made clear by the ideological assault on public pensions so far, if future income streams (i.e. tax receipts) are not enough to meet those future obligations, those future obligations are simply defaulted on (in part) by the state, meaning the liability figure reduces accordingly to what is 'affordable'. On the other hand, if the balance of class forces shift in a way that further default by the state on obligations is not an option, then there will be a redistribution of future income streams, towards the payment of decent public pensions and away from things like corporate tax evasion & avoidance which would bring in a hundred billion odd a year (which btw discounted to present value over the next twenty years at a 2.5% discount rate amounts to around 1.5 trillion, which would substantially dwarf what any actual real deficit might be)
So basically, any way the future turns out, for better or for worse, your 'analysis' is useless. What you are saying is the equivalent of some deluded lefty saying that the net present value of future tax receipts over the next twenty years is 9.4 trillion, so that means we have an asset in the here & now of 9.4 trillion that we can spend on anything we want and everything is rosy, so trebles all round
free spirit
more tea vicar?
well, that might be the case in the middle of a recession / depression, but 2007-8 accounts for the NIF show £75,549,355 NIC income, and £57,538,300 pension payments, or £70,307,838 total payments.
I appreciate that this doesn't cover all pensions related costs, but a £42 billion balance at the end of 2011 shows the NIF isn't exactly in dire financial straights even after 4-5 years of recession. In fact I'm pretty sure the government has been borrowing from the NIF rather than the other way round in recent years since Brown put the NIC up instead of putting income tax up directly.
http://www.hmrc.gov.uk/about/ni-fundaccount10-11.pdf
http://www.hmrc.gov.uk/about/ni-fund-ac-gb-0708.pdf
free spirit
more tea vicar?
Not just that, but the majority of those pensions payments themselves will be recycled back into the UK economy directly, where much of it will eventually end up back in government coffers via VAT, income tax, corporation tax, NICs etc etc paid on the goods and services the pensioners spend their money on.
Bottom line anyway is that pensions provision is dependent long term upon the performance of the economy, so better to focus on that than to focus on long term pension payments now at a point where our current and immediate future commitments are well funded.
free spirit
more tea vicar?
yeah, that'd be the private sector pensions, which oddly enough, aren't funded from NI contributions or tax.
also, we're in the middle of a sodding great recession, so it's not surprising company pension funds might be in deficit... not to mention the impact of Brown's tax changes in 97, that probably accounts for £100 billion + of that deficit.
As I say though, it's all dependent upon the long term performance of the economy. If / when we actually get out of this recession, the majority of these pensions issues will pretty much automatically sort themselves out, so the economy is the problem and the solution, not pensions policies themselves.
I'm aware in saying that, that Falcon probably expects that the economy is destined to reduce pretty much forever, as a result of a rapid reduction in oil availability, so I can see that his position on pensions liabilities is consistent with this position. I just disagree with him on the inevitability of this long economic decline, and therefore logically would have to disagree with his position on the pensions deficit.
I do think that this should really be expressed as part of his statements though.... ie in the event that the economy never recovers and instead economic output continues to drop long term, then there will be x amount of unfunded pensions liability.
TBh though I think we can all agree that most of the country would be increasingly fucked in multifaceted ways if the economy continued to tank long term, so I'd suggest we focus on a program based on stimulating economic growth, instead of trying to cut pensions to reduce this supposed pensions liability. Such a policy would inevitably be doomed to failure anyway, particularly as part of a wider programme of cuts, as it will inevitably lead to further falls in economic output, and therefore in tax and NI receipts that'd likely be bigger than any pensions cuts they could manage.
also, we're in the middle of a sodding great recession, so it's not surprising company pension funds might be in deficit... not to mention the impact of Brown's tax changes in 97, that probably accounts for £100 billion + of that deficit.
As I say though, it's all dependent upon the long term performance of the economy. If / when we actually get out of this recession, the majority of these pensions issues will pretty much automatically sort themselves out, so the economy is the problem and the solution, not pensions policies themselves.
I'm aware in saying that, that Falcon probably expects that the economy is destined to reduce pretty much forever, as a result of a rapid reduction in oil availability, so I can see that his position on pensions liabilities is consistent with this position. I just disagree with him on the inevitability of this long economic decline, and therefore logically would have to disagree with his position on the pensions deficit.
I do think that this should really be expressed as part of his statements though.... ie in the event that the economy never recovers and instead economic output continues to drop long term, then there will be x amount of unfunded pensions liability.
TBh though I think we can all agree that most of the country would be increasingly fucked in multifaceted ways if the economy continued to tank long term, so I'd suggest we focus on a program based on stimulating economic growth, instead of trying to cut pensions to reduce this supposed pensions liability. Such a policy would inevitably be doomed to failure anyway, particularly as part of a wider programme of cuts, as it will inevitably lead to further falls in economic output, and therefore in tax and NI receipts that'd likely be bigger than any pensions cuts they could manage.
Compare with:
You assert, correctly, that a deficit would be the difference between the net present value of future pension obligations and the net present value of future income streams. The reference presents the government actuaries estimate of the deficit as determined from the net present value of future pension obligations and the net present value of future income streams. It would be £2.2 trillion if the discount rate they used was correct. It isn't, and the deficit is higher.
The post exactly addresses - and refutes - your points, and all you can respond with is your usual exercise in ad hominem based misdirection.
If you could control your persistent incivility, I would have an interest in discussing this with you. But since you apparently can't, I don't.
Life expectancy has risen. The proportion of people aged 65 and over will rise from 13% on 1971 to 22% by 2031, while the number of people of working age will fall by the same amount. The number of people of working age supporting each pensioner has fallen from 9 in 1926 to 3, and is still falling.
Care and medical costs (i.e. liabilities which must compete for funding for pensions) will rise proportionately.
I don't think it is true to say that pension issues will automatically sort themselves out. I think it is true to say that demographics automatically compounds the primary problem of collapsing tax take, and bond and stock yields.
The "middle" of? Under what circumstances do you perceive there to be an "end" of this recession, to which a "middle" can be related?
"Recession", in its conventional use, is intended to convey a sense of temporary departure from some higher norm. I don't think that describes the economic situation in which we now find ourselves i.e. a radical departure from historical trends, driven by fundamental changes in the underlying resource base.
If it were the case that we are at the start of a permanent contraction, or even a future growth rate which is lower than the historical one that solvency is predicated on, rather than the middle of a recession, wouldn't it be reasonable to assert that a system conceived on an assumption of permanent growth and now, through demographic changes, dependent on an even higher rate i.e. the UK pension system - is insolvent?
love detective
there's no love too small
You're even contradicting yourself in your own posts now
The reference does not present the actuaries estimate of the deficit, it presents the actuaries estimate of the present value of future pension liabilities
It's revealing that you were unable to respond to my post in your own words, and instead post a link from a right wing pro austerity think tank that actually contradicts what you yourself are asserting - the reference you posted clearly relates to the 2.2 trillion figure as not a deficit as you suggest, but a liability, and the liability represents the present value of future pension payments. i.e. it represents future payments expected to be made but does not take into account future expected receipts coming in that are available to fund those payments .
The quote that you quote is crystal clear that it is talking about Gross future pension payments not future deficits, i.e. it says:-
'it then takes the sums which are expected to be paid and discounts these back to their present values using a discount rate'
i.e. it focuses only on the future payments in isolation, and not the future income that is available to meet those payments. To estimate a deficit the estimates would need to look at both expected future payments and expected future receipts available to meet those payments. That you can't see that the quote that you quote from the EPC contradicts what you are arguing is hilarious
I also note that you have edited your post significantly since you first posted it (including changing the quote from the EPC), your initial post was even more muddled & confused that this one, but unfortunately a lot of that confusion and ignorance of the topic remains in your edited version
If i were you i'd be a bit embarrassed at posting up something to back up your argument which actually contradicts what you say
You clearly don't have a clue what you're talking about, yet are determined not to admit it, least of all to yourself
love detective
there's no love too small
I'm sure there's a quote somewhere about how it's better to remain silent and let everyone suspect you're an idiot than to speak out and have it confirmed
Thank-you for confirming our suspicions.
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