Why is the pension crisis global?

Piggy Bank

We know the situation in Britain and many blame only Gordo for their pension ills.  This is an issue in layers and one layer below that is people’s own bad decisions plus their over-reliance that the pension scheme would always work.

Moving one layer below that, why on earth should the cost of things like houses be as they are – the answer is in the explosion of and control of credit in the market, playing on people’s natural ambition and stupidity.  If you take a median salary of £15 000 [excluding the very high and very low] and a house price in Britain of £250 000, then it is obvious that we’re talking around 15 or 16 times a year’s gross.

The last time [and this shows how long ago] I was in the market, the salary was £12 000 and the house I looked at near Bridlington cost £58 000.  A considerable difference.

All major items have gotten right out of control, from council tax to water rates, to the point where it is impossible to live.  Then we come to pensions and though Brown did wreck the pension funds, the fund managers themselves have much to answer for and … well, yes … so do the ordinary people who failed to save.

Instead of attacking the source directly – the BofE and the banks themselves, the credit issuers, people chose to get more and more credit cards to compensate for the last ones which were limited out, without stopping for one moment to think why this runaway price inflation was happening.

More worrying than this, for me, is how this thing has turned global.  Why should a crash on Wall Street result in people in Australia and New Zealand being out of work?  Why would Germany be in a dire position as well?  Why would all of us be in financial crisis right now?  Why would people approaching pension age in Canada be facing penury because they’ve failed to save enough – exactly as in the UK and New Zealand?

You see what I’m saying – why the global nature of what people are seemingly doing locally?

From the Canadian Globe and Mail:

It is very, very agonizing to see these people who have worked all their life to try and get a pension – and, all of a sudden, it falls apart. ” Canadians are facing a national pension meltdown. Decades in the making, it has worsened dramatically during the recession. Businesses are shredding pension promises, retirement savings are shrinking, employees are working longer and the elderly are selling homes and returning to the workforce. As the retirement dream fades, policymakers seem unwilling to tell Canadians they have not saved enough to retire.

Why is it global?

The answer is in the question – because the markets are globally controlled. That’s why there’s a BIS, IMF and World Bank. That’s why every nation’s hedge funds and credit issuance is the same, why the greed was the same, why the sub-prime crisis was the same.

What fuelled the global nature of the misery? Why did a pensioner in Toronto and in Dagenham both simultaneously fail to cover themselves?

Answer that question accurately and you’re close to identifying Them.

9 comments for “Why is the pension crisis global?

  1. October 17, 2009 at 13:50

    The question doesn’t seem so complicated. When my credit card free German friends laughed at the crisis breaking in Britain and mocked my compatriots for their spendthrift ways, I said “What do you think they were borrowing to buy? Poggenpohl kitchens, BMW cars and Miele dishwashers. Your turn next”. We do not live in economic silos. The latest archaeology suggests that we never did. Even the guys living in Crannogs in what is now Scotland owned artefacts from far away places.

    Personal economics is like driving a car. You are at risk of harm from other idiots all the time. All you can do to minimise your risk is drive carefully yourself and be alert for incoming fools. There is no “Them” James. It’s “Us.”

  2. October 17, 2009 at 13:59

    There ain’t no pensions crisis! Never has been, never will be…

    “Pension” means transfers from working age to retired. Those transfers might be because people save up money during working life and buy shares, or via the tax/welfare system, it’s the same difference, e.g. maybe private pension funds own 30% of UK plc; or maybe UK plc pays 30% corporation tax and that goes on the basic state pension (the numbers stack up, BTW – the basic state pension, UK corporation tax receipts, UK private pensions in payment and cost of tax-breaks for private pensions are all in the order of £40 billion).

    So pensioners have 30% economic ownership of UK plc (via tax/welfare) which is pretty universally distributed and 30% indirect ownership (via pension funds) which is unevenly distributed (which is fair enough).

    As it happens, the state pension system is cheaper to administer, causes far less distortions and is far less prone to sudden collapses in pension income (see Equitable Life etc etc), therefore if we can agree two basic variables,
    a) At what age you get a state pension (an enhanced Citizen’s Income, if you will)
    b) What per cent of GDP can we divert to pensions via the tax system.
    the rest of it all falls into place.

    For example, retirement age 65, 5% of GDP = a flat state pension of £140 per person per week. The kicker is, with a flat-rate non-means tested pension, there would be no disincentive to save up privately, so the massive subsidies for the pensions industry could be scrapped and income taxes cut by ten per cent (i.e. from thirty per cent to twenty per cent) and people would have a higher disposable income during their working lives to spend, save, invest or speculate as they please.

    If people spend the extra income at the betting shop or in the pub, so what? Somebody else owns shares in the betting shop or the brewery, so one man’s expense is another man’s income.

  3. October 18, 2009 at 00:08

    @Mark can you explain in couple of sentences how pensioners are benefiting from this system?

  4. October 18, 2009 at 00:09

    BTW James, the pic reminds me of the pensions pig… a very sore point in my TU branch…

  5. October 18, 2009 at 12:01

    Cherry Pie, I don’t understand the question – do you mean how do they benefit from the current system; or do you want to know why I think that we (taxpayers and pensioners alike) would be better off with a Citizen’s Pension and lower tax income tax rates?

  6. October 18, 2009 at 18:40

    Mark, sorry I wasn’t being very clear. I meant how do they benefit from the current system?

  7. October 18, 2009 at 23:33

    @ Cherry Pie, pensioners benefit from pensions, that much must be clear. To the extent that the taxpayer hands over money which goes to pensioners, at least the debate is simple – how much are taxpayers prepared to pay; how much do pensioners need to be paid.

    What annoys me is all the non-pensioners who benefit from the current system of tax-breaks, all the insurance companies and pensions salesmen; and the bureaucrats doing the means-testing – that is just a bottomless pit.

  8. October 19, 2009 at 18:37

    @Mark

    What annoys me is all the non-pensioners who benefit from the current system of tax-breaks, all the insurance companies and pensions salesmen; and the bureaucrats doing the means-testing – that is just a bottomless pit.

    I also think that the state pension is too low at the moment. But as you say, how much is enough?

  9. October 19, 2009 at 21:48

    After the italics it should say I totally agree with that. Followed by the – I also think comment.

    I am sure I typed that in LOL.

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