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I am a macroeconomist located in the United Kingdom and have my own school of economic thought 'Morganist Economics', which the British government uses extensively. I have written a paper that uses a new technique I have developed that could generate an additional 2 to 4 percent of economic growth per year, through the superior placement of pension funds investments to increase the velocity of transactions within an economy during a set period of time.
The work intends to outgrow the government debt as percentage of GDP rather than reducing government spending or increasing taxation, both of which could be damaging to the economy. I have linked to the paper below entitled, 'The Missed Aspect Of Macroeconomics - Pension Fund Easing'. The paper has been sent to the White House, as well as the Chancellor of the Exchequer in the United Kingdom and all of the Treasuries in the European Union.
Google Morganist Economics - The Paper is on the 'Pension Fund Easing' page.
I think it's called public pension underfunding. The US federal government already does that. States in the US have done that before. They delayed fully funding the pension funds while the economy was in recession. They are relying on fiscal and monetary stimulus from the federal government to bail them out. In some states, the pension underfunding bailout is probably going to have be done with the assistance of the Feds, perhaps with haircuts applied to pensions.
I think it's called public pension underfunding. The US federal government already does that. States in the US have done that before. They delayed fully funding the pension funds while the economy was in recession. They are relying on fiscal and monetary stimulus from the federal government to bail them out. In some states, the pension underfunding bailout is probably going to have be done with the assistance of the Feds, perhaps with haircuts applied to pensions.
Pension Fund Easing is different, the funds are contributed to the pension and then invested. It is the investment criteria that is altered. Some investments have faster spending rates than others, by directing pension fund investments into these entities the velocity of transactions can be increased. Your position of pension underfunding is deferring pension contributions rather than placing pension fund investments in the most optimal investments. The difference is pension underfunding is the avoidance or delaying of pension contributions rather than the directing or placement of the funds paid into pensions. Pension fund placement can be optimised and can generate a greater velocity of transactions, this in turn can increase economic growth. I estimate by as much as 2 to 4 percent per annum.
So you look to optimize velocity of investments rather than maximize net return?
On a long term basis are you merely changing the timing of the turnover rather than maximizing the return which will ultimately lower costs and thereby lower taxes?
So you look to optimize velocity of investments rather than maximize net return?
On a long term basis are you merely changing the timing of the turnover rather than maximizing the return which will ultimately lower costs and thereby lower taxes?
Are you saying that the new placements of pension fund investments that increase the velocity of transactions will come at the price of higher returns?
A lot of the investments that generate a high velocity of transactions give higher returns and are often more stable, corporate bonds is the example I would give.
I would also be looking at transferring pension funds that are near to maturity (when the fund is turned into an annuity to receive income in retirement) to become fixed income returns to prevent the chance of the investments falling in value, which will reduce the annuity income.
I would be looking at a whole new pension, banking and investment product range to maximise the velocity of transactions, maximise investment returns and stabilise pension income. New types of pension schemes may also enable this process.
I hate to tell you, but all the work you did was for nought.
America and most other Western Countries lack the stomach to do what it takes to reduce their debt loads. Whether that means higher taxes, less spending, finding ways to grow their economies faster--or all of the above--it all means some sort of sacrifice on the part of the populace as well as the squelching of a variety of entrenched special interests--both in corporations and the government.
We're headed for financial collapse and coronavirus accelerated the decline.
So, raid the public pension funds to avoid cutting spending?
Great idea!
Now go away.
Public pensions have nothing to do with it. There is massive amounts of money that is invested into private pensions that could be directed in a more efficient way. That doesn't mean to raid the pensions either, it simply means just make the more appropriate investments for economic growth. I will give you an example, if an individual pays into a private pension each month let's say $2,000s. They will receive tax relief on this pension contribution that is not charged income tax, the money will then be put into a pension investment fund where it will be invested in a financial product. Some financial products spend money quickly due to necessity, which speeds up the number of transactions in an economy over a set period of time. Some financial products spend money slowly, which slows down the number of transactions in an economy over a set period of time. The key to Pension Fund Easing is to invest the money that all of the individuals who are saving their $2,000 a month (that receives tax relief from contributing into their pension) into the financial products that spend money quickly, this is currently very inefficient and can be optimized through altering the composition of pension investments.
I will give you an example of how this can be performed, corporate bonds are bonds corporations issue to raise capital. They are a secure investment because if the corporation enters into administration the corporate bonds get paid out before shares. They also provide fixed income returns, which is ideal for pension annuities (this is another source of investment that can be used to speed up the number of transactions in an economy over a set period of time) providing a set regular income for pensioners in their retirement. Corporations only borrow money when they want to spend the money quickly because they will have to pay interest on the money they borrow and the longer they borrow the money the more expensive the interest payments become. By selecting to invest pension funds and pension annuity funds in corporate bonds the speed of transactions can be increased massively in the economy in addition to receiving more security and fixed income returns. This is only one example, but the change in the composition of pension fund investment can lead to an increase in rates of consumption to provide what I estimate to be an additional 2 to 4 % of economic growth per annum. This can be harnessed.
We had the chance to do what you suggest, maybe 70 years ago. Those days are gone.
The federal US debt is about $27.2 trillion and rolling upward. $6-7 trillion of that is owed to ourselves, when entities such Social Security collect more than they spend (or prepays their pension, like USPS) and Congress takes that money, spends it and issues debt to the entity. The federal pension unfunded liability is estimated about $1 trillion. The Social Security and Medicare unfunded liabilities are estimated at about $90 trillion
Annual deficit spending will continue to run $1-2 trillion, or higher, regardless of who is elected President tomorrow.
With those financial facts in hand, what is the probability that the government will reduce spending in the foreseeable future, or that we will ever approach non-deficit spending? I suggest that will happen only when the FedRes can no longer hold interest rates artificially low and interest payments reach a size where they can only be made with inflated dollars.
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