PayGo Finally comes home to roost.

[E. Blackadder]

And it's not pretty (http://www.nytimes.com/2003/06/29/international/europe/29AGIN.html?ex=1057464000&en=cdd13bb8ca30c8ed&ei=5062&partner=GOOGLE).


With its population not only aging but shrinking as well, Europe seems to face two broad possibilities: either it will have to make up the population shortfall by substantial increases in immigration, which would almost surely create new political tensions in countries where anti-immigrant parties have gained strength in recent years, or it will have to accept being older and smaller and therefore, as some have been warning, less influential in world affairs.

Of course, being the NYT, it's suspect, but Jayson, Paul, and Maureen can't have written everything in the paper.

[Spectrum]

Lets try and project the market forces that Europe, America, and Japan will be feeling. As you have relatively more seniors, demand for health care will increase. Public pension paygo programs will be experiencing stress. Demand for investment and savings products will continue to increase.

Alot of money will be seeking a place to invest this should be deflationary. Higher taxes to fund public pension programs should slow the economy. Add in slow population growth and you have some real defationary forces.

As these seniors spend their money on entertainment and health care these industries should see a boom. As these seniors pass away, they should leave their wealth to a generation more likely to quickly spend something they haven't earned.

I guess the forces of deflation seem the stronger argument. Any opinions out there?

[campbell]

:bump:

I have been trying to find the oldest public pension-related thread in this forum with respect to making predictions. [and trying to avoid posts by He-Who-Must-Not-Be-Named]

This isn't exactly what I was looking for, but it's close. At the very least, Europe seems to be hitting its demographic wall right now.

While we are looking at assets and the like, a lot of these problems are being driven by the underlying demos (http://powip.com/2010/05/demography-is-destiny/), and these have been baked-in for a long time.

[Spectrum]

All right, its 7 years later and lets give it a look back. Interest rates lower, check. Public pensions under stress, check. Inflation lower, check. Demographics continue to create demand for fixed income keeping interest rates down. I don't see a US treasury at 1% scenario, but I expect 2% yields this decade. The new divided US government should provide a restraint on spending/goverment deficit finaincing. The India/China growth factor is now significant and will prevent the 0% treasuries possibility. 2 billion people with GDP growing at 8% a year will drive growth globally.

The Wall St. Journal just ran an article about interest rates being so low finacial institutions won't be able to make a spread. Banks are already paying their customers 0% on deposits and it can't go lower. Pension funds reinvestment rates are causing more problems. Insurance companies will have to raise premiums when investment income goes down, or worse, lose money on old business that guarantees 3-4% interest.

I always enjoyed He-who-must-not-be-named. I guess I'm a minority on that. When he blathered on too long, just click to a new topic.

[ElDucky]

All right, its 7 years later and lets give it a look back. Interest rates lower, check. Public pensions under stress, check. Inflation lower, check. Demographics continue to create demand for fixed income keeping interest rates down. I don't see a US treasury at 1% scenario, but I expect 2% yields this decade. The new divided US government should provide a restraint on spending/goverment deficit finaincing. The India/China growth factor is now significant and will prevent the 0% treasuries possibility. 2 billion people with GDP growing at 8% a year will drive growth globally.

The Wall St. Journal just ran an article about interest rates being so low finacial institutions won't be able to make a spread. Banks are already paying their customers 0% on deposits and it can't go lower. Pension funds reinvestment rates are causing more problems. Insurance companies will have to raise premiums when investment income goes down, or worse, lose money on old business that guarantees 3-4% interest.

I always enjoyed He-who-must-not-be-named. I guess I'm a minority on that. When he blathered on too long, just click to a new topic.

Insurers in Canada have been raising rates left and right. The assumed 6% after tax (including lapses) just isn't possible.

Banks are already at a negative rate at 0%, since they throw fees on top of that.

[limabeanactuary]

[I enjoyed He-Who-Must-Not-Be-Named as well, but I didn't want to start anything in that line by bumping an old thread]

[Jwallace]

I wish I knew who we weren't talking about.

[Spectrum]

Nice pick up on negative interest rates (0% minus fees = less than zero). Could cause people to stash cash in the mattress as a better alternative. I guess we will be seeing a boom in "alternative investments" like gold coins, art, wine, etc. as people try anything to get ahead.

As to He-who-must-not-be-named, Andy Lang was an actuary with very strong opinions on actuarial topics. He had an edge of self righteousness/anger that eventually lead him to make some personal attacks that got him banned. That banning caused a furor. In the end this site survived, no thrived as The Place for actuarial chat.

Background: The SOA pioneered an actuarial chat forum, but required everyone be identified as themself. That lead to it being called "the desert forum" because no one used it. This site emerged, gained critical mass, and put the final nails in the coffin of "the desert". The SOA's fear of "people behaving unprofessionally" if anonymous, was realized by one of the few unanonymous posters on this site. Pretty ironic.

[limabeanactuary]

AL wasn't exactly banned, but the conditions for his return makes it highly unlikely he'll be back.