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In Defense Of A Nation

Sunday, January 5, 2014

By Michael Mccune: The Rant (US Government auditor for 16 years In Cheyenne, WY. -Aging Population Defies Economic Projections- (( to Have Michael send you the Rant to your Email contact Him Here (( mccrant@gmail.com))

Aging Population Defies Economic Projections

"Will the last person working please remember to turn off the lights?" That should be the motto for the U.S. economy now.

 

Back in 2010 when details of the Affordable Care Act were emerging, one of the first outcries was over the "death panels."

 

Not that they were going to directly kill anybody but, despite denials, when budgetary concerns over-ride everything else the bean counters in charge of allotting medical services to an aging population put the seniors at the back of the line because the ability to contribute to society is vastly lessened. Therefore the death panels would hasten the path to the grave by denying older people health care simply based on a cost prospectus.

 

The aging population phenomena is having carryover effects right now. Politicians and regulatory agencies are having to come to grips with some very simple, very unpleasant truths about the state of the economy and the long-term future caused by the supply-side demand on services by an ever-growing segment of the population--the seniors. 

 

Here's the ugly truth of why this recession has lingered for over six years despite the efforts of the politicians and the bureaucracy. Seniors take more than they can replace from the economic future. Seniors strip the economy of vital resources. The situation is not limited to the United States but is gripping the entire developed-country portion of the globe. The chronically weak economic growth and more volatile international economic woes are only part of the problem though.

 

Back in 2006 then-Fed Chairman Alan Greenspan recognized the age threat and oddly enough his biggest fear was the risk of future financial crises caused by innovative investments called "death derivatives."

 

That is coming to pass. The inclusion of the Obamacare "death panels" simply recognizes that fact. It also illustrates why it was so important for this bill to never see the light of day. It fundamentally changes the single largest sector of the economy at a time the economy cannot stand any more stress.

 

Stress on the economic engine is being exacerbated by the fact the senior portion of the population outnumbers the working age people. The economic engine was not designed for this happenstance. Everything that has been done by the government since the days of FDR's New Deal has been geared towards an economy with ever increasing numbers of workers, not an surging growth rate in the number of takers and a decline in available jobs.

 

The Baby Boomers fueled government's increasing disdain of individuals. The Boomers set America up with a ready-made source of workers and consumers for the future. But that future is now past. The aging portion of the population increasingly is having to put on work clothes long past the expected retirement age and labor on--not in positions they are suited for but positions they can find like retail clerks, home-care companions or fast food preppers.

 

A 2012 study conducted by the National Academy of Science showed the declining birthrates and longer lifespans were a recipe for economic disaster. The Academy predicted output per person--particularly in technological advanced societies--would allow for only a fraction of the growth rate seen over the past half century. What was missed was the affect on the developing nations like Mexico, China and Brazil. They had no economic surplus to withstand any unforeseen effect on their financial well-being.

 

The crux of the problem is the usual tools employed by central banks around the globe will not work in a economy not being replenished in the number of workers but increasingly top-heavy with the elderly who are not nearly as prone to impulse buys as consumers.

 

In this world, interest rates must be kept artificially low compared to past norms. This begs the economy to keep flirting with deflation and encourages foolish private-sector borrowing. The situation lends itself to stifling innovation but keeps dinosaur companies alive--such as what happen with TARP and stimulus financing by the government.

 

Where this aging will be felt most is in the established pension plans. Already resource poor and unable to meet current demands, what will be the result if pensioners' life expectancy rises just a few months? The expected demand could obligate the plans to expend 8-12% more than currently projected for EACH pensioner. Those plans, including Social Security and Medicare, were not built to take such a hit and the load will revert back to taxpayers, working taxpayers that is and they are already an endangered species.

 

In a sluggish economy those people will not have the extra income necessary to support the additional financial demands, putting further pressure on the economy to implode.

 

In August the Joint Forum of the International Bank of Settlements in Switzerland, noted the increased activity in "longevity risk" in derivative swaps, bonds and hedges. It flatly stated "Losses arising due to longevity risk may affect the stability of the entire global financial system."

 

It is ironic, in many ways, that the very prosperity and tech progress seen following the end of World War II to now, undermined the financial system it built.

The falling workforce participation rate reflects this unstable foundation.

 

A workforce smaller than the rest of the population is not new. But a workforce mostly mandated to permanent part-time employment is new. All the projected economic futures based on this new reality are not uplifting but show a steady, sharp decline in the standard of living.

 

A way to avoid or at least delay that is to eliminate as many of the non-productive as possible. At least this theory supports the basis for the Affordable Patient Care Act's inclusion of "death panels". As a cost-efficient mandate, it is better than anything anybody has come up with since Hitler began eliminating as many mouths as possible from his poverty-stricken country in the 1930s and followed closely by Stalin in Russia, Mao in China and other cash-strapped dictators around the globe.

 

Only when the normal order, on which government has been operating since the mid-1930s, is restored and when workers can support the burgeoning weight of the takers, will the economic picture improve.

 

This means America has more pain coming its way from the economy and the attendant bureaucratic red tape. The worst truth is the aging person in the mirror is the guilty party.

 

"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson 

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