August 19 2017
WORSE THAN THE DEPRESSION OF THE 1930s?
Will we soon experience that our life savings will be vulnerable, our pension plans go broke and government financial generosity and its medical system cease to be because we live too long, and/or because our financial framework will falter?
These questions are more than mere academic. They are to be seriously considered because of recent developments.
Decades ago, when I was associated with a Life Insurance Company, I took special courses to qualify for CLU -Chartered Life Underwriter-, and learned that pensions, for instance, depend on two factors: the interest earned on the contributions, and the life expectancy of the participants. You can be sure that the pension planners would be delighted when the interest earned would be higher than assumed, and equally thrilled when people die before they are supposed to go to their rest. The aim of the pension people is the opposite of their life insurance colleagues who like to see their clients live forever because the final payout only comes with death.
In those days- 1950s-1980s – a standard condition in the life insurance policies I sold was that it guaranteed 6% on its cash values.
All through the 19th and 20th century this was seen as a fair return on the money – until some 10-15 years ago. My first and only mortgage in 1963 carried 6.25% interest and that was considered normal. We all know how low the rate is now!
Oh Those Pension Plans Today!!
It so happens that people live much longer than projected, and the rate of return on money invested is much lower than assumed, so guess what? You might not receive what you were promised: pension plans everywhere are going broke if they contain the clause that they will pay a guaranteed amount, so-called Defined Benefits.
But there’s some good news: Longer lives, especially for men!
Longer lives are now actually favoring men judging by the mortality tables. I have in front of me a Period Life Table, the latest being from 2014 , and applying for US conditions, which are a tat less favorable than Canadian statistics, but that’s all I could find, and it affirms that “The older you get, the older you get.”
Here is the proof of my premise. In the good old USA – BT: Before TRUMP – in 2014, a male baby at birth had a life expectancy of 76.33 years, while a female one had 81.11 years, a difference of almost 5 years. Canadians, thanks to their country-wide health insurance, do a bit better.
Of those who are alive at 65, men still live, on average, till 82.84 years, and women till 85.44 years. That means that men have gained almost 7 years since birth and women just less than 5. It gets even better: at age 70 when life expectancy narrows even more: 84.32 versus 86.53.
Thus slowly the men are gaining on the women. That trend continues, narrowing the gap at 75 to 86.11 and 87.59, and almost getting even in life expectancy at 90, with a difference of a bit less than a year, at 94.08 and 94.85.
Perhaps I should add that a man lives an average of 15 years after becoming impotent. So, keep IT up, you guys. Moses, at 120, still had excellent eye-sight and was still going strong, his natural force- including sexual drive- unabated. (Deut. 34:7).
But….Yes, there always is a ‘but.’
Getting older comes at a price, a steep monetary one for the nation as a whole. Scores more of seniors mean huge tax increases in the near future…for the young. With a growing number of aging people and with fewer workers entering the economy, tax dollars to support our generous old age allowances and the increasing medical costs are becoming harder and harder to come by. The current stimulus injections, already causing immense deficits on all government levels, will make matters worse, especially in the USA.
So what are the real ’old age’ numbers?
I am a great one for statistics: in 1900, 4.1 percent of U.S. citizens were older than 65, but by 2000 that number had jumped to 12.6 percent; by 2030, 20 percent of us will be in that category.
Canada is not ready for that, even though it is in better shape than most other industrial countries.
How do we prepare for the unavoidable?
Although it is not a bible text, nevertheless it is true to some extent, that “God helps those who help themselves”. By this I mean that only you can take it upon yourself to become and stay in good shape, and so grow older without becoming dependent on waning government assistance, because next to rapidly growing pension outlay, the cost of medical care is also growing exponentially, making it certain that our welfare state will not be able to continue in its present state.
Expect the unexpected.
It is simply impossible to keep on conducting business as usual. Circumstances have changed dramatically. Look what’s been happening: wages are flat or declining, consumer debt is up in the stratosphere, and job security is disappearing, while our natural habitat is suffering and the air is being saturated with our carbon deposits. Student debt is sky high. Don’t expect them to pay for environmental repair. Nobody will, so…………
In other words: the old track is broken. The new track has fewer jobs, less income, larger deficits, increasing hardship and greater weather volatility. This simply means that the current economy can never “recover”, can never go back to where it was before the crash and before the air-water-soil was relatively pure.
So instead of asking when the recovery will start, we should be asking what the new economy will be and when the new economy will begin. Expect the unexpected.
First the good part: so far the elderly enjoy the best of all worlds: they are diligent voters and the politicians have greatly rewarded them, so they have a lot to be thankful for.
For my wife and me, there are definitely great blessings in being older. For one, we are at peace. Tranquility is the word for us. No more battles to wage, no more arguments to win or lose. Let go, let God. We can’t solve the world’s problems, so we don’t get worked up as we sometimes used to do, although Trump is something else.
We two ever more clearly see the interconnectedness of us with the entire creation. I love my vegetable garden – and now that the beans are picked, I don’t mind that a few rabbits eat my green bean plants.
I pray for my trees even though our four apple trees have taken this year off. I treasure my bike and often pray while pedaling on my frequent trek to the village, almost 6 km away, along a busy highway to get our groceries.
How can we enjoy life, even in old age?
Love for creation is the first holy commandment. The second love commandment includes our holy duty to love our neighbors as ourselves. To love takes effort. To love one-self means to purposely keep fit: “Old minds and bodies are like old horses; you must exercise them if you wish to keep them in working order.”
It is exercise that supports the spirits, and keeps the mind in vigor. Healthy older adults can do much more than had been assumed even a few years ago. Now middle age can go well into the 80’s. If you want to stay alert, read, and limit T.V. to the minimum. If you want to stay healthy: walk, bike, run, write a blog, mow the lawn not on a riding mower, but a push one, preferably an electric one. All others spout out pollutants, and lawn mowers are the worst for the environment, especially your own lungs. I would not be surprised that there is a connection between prostate problems and gas-powered mowers.
Even moderate levels of physical activity can limit declines in brain function. The best kind of exercise is aerobic, a sustained movement, such as in running and biking, something that makes you sweat: it improves verbal and nonverbal memory and gives you new ideas. My best thoughts come when I run, which I do 2-3 times per week.
A startling statistic reveals that for every hour we RUN (not bike or walk), we gain seven hours in our lifespan.
Basically there is no such thing as being old as long as we stay active, socially involved, eat well – not too much – and consume genuine food, preferably home-grown, like our grandparents did, visit with friends and relatives, stay optimistic, agreeable and open to new experiences and new theological concepts, such as seeing CREATION as God’s PRIMARY word.
Let’s face it: the church has lost THE GOSPEL OF THE EARTH. It must REGAIN CREATION. Instead of aiding in the birth of new ideas it has caused the dearth of them.
No wonder there are dark and ominous clouds on the horizon.
Today one of the questions affecting us all is: how long will the generous pension support for seniors and free medical care continue to be?
A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money. Tens of millions of Americans depend on this public pension program as their sole source of retirement income, so you’d think this would have been front page news, and that every newspaper in the country would have reprinted this perilous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.
But that didn’t happen.
It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history. That’s not hyperbole either– the numbers are very clear. Mind you, the same is true of CLIMATE CHANGE. There too nobody seems to care.
The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.
In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.
Fat chance. Tax cuts for the rich, yes, that is important.
The Social Security shortfall is more than TWICE the national debt, and nearly THREE times the size of the entire US economy.
Even so, though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still too optimistic.
Back to the INTEREST PROBLEM. What will interest rates be in the future and how high (or low) will inflation be? Or take productivity growth. TRUMP promised 3 percent growth. This will not happen. No growth is more likely, and that means collapse, because our total economic model is based on growth.
Social Security assumes that productivity growth in the US economy will average between 1.7% and 2% per year.
This is an important assumption: the higher US productivity growth, the faster the economy will grow. But -actual- US productivity growth is far below their assumption: over the past ten years productivity growth has basically been stagnant and last year it actually was NEGATIVE.
The refusal to admit immigrants to the USA will cut the birthrate, meaning a shortage of workers. This is important, because a higher population growth means more people entering the work force and paying in to the Social Security system.
And of course, the most important assumption for Social Security is interest rates, which are far below projections. Some even predict negative rates. Trump is rapidly achieving the opposite of his campaign slogan.
An ominous warning.
Gail Tverberg, an actuary with an international reputation, in her August 14 blog, OUR FINITE WORLD, concludes:
“We seem to be sleepwalking into an even worse version of the Depression of the 1930s. Even if economists were able to figure out what is happening, it is not clear that there would be a good way out….We seem to be facing a predicament with no solution.”
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