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I would agree that this is pretty much what the "average Joe" knows, but here the "average Joe" is being fooled. Suppose Joe has $500,000 in the bank and needs $25,000 to live on, so take these two cases:
1.) Interest rates are 5% and inflation is running at 7%
2.) Interest rates are 3% and inflation is running at 3%.
Now, "average Joe" is going to feel wealthier in case #1 because he can generated his needed $25,000 from interest alone and his nominal principle won't decline. But the two situations are in fact identical....and this isn't just some academic consideration...its reality. In both cases the value of the principle, namely what it can buy, is declining at the same rate.
Not exactly, because as I said earlier the inflation rate is a totally fictitious number just like the unemployment number. Anyone who believes that unemployment is 9.1% right now has rocks in his head, just like anyone who believes inflation is currently running at 1% needs to have his head examined. In any case, one's spending habits can help to avert the full effects of inflation, but nothing can be done about what the banks pay on accounts. I'll take 5% on my CD's and 7% inflation any day because I can bring that 7% down to 4% by watching what I buy.
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Sorry, I don't follow, why should I care about their self-created problem because I'm going to one day reach retirement age?
Sorry, but why should younger generations be burdened financially because older generations failed to save appropriately for retirement? Its not just that either, older generations stole from younger generations and now they want younger generations to fork over more money?
Younger generations can't afford to support the social security, medicare, etc of the current generation going into retirement.
Well, as I said you'll feel differently when you're on this side of the fence 40 years from now---if the American economy is even intact by then, which I doubt. But as I also said younger generations should not even have to be burdened. Your gripe is with the Feds, not old people. Caps need to be lifted off the top wage (108K) taxed; means testing should be in place for the benefits; the age should be gradually raised to reflect growing lifespans, etc. All this can be done without hurting the kids like you.
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There was no such promise, every social security statement came with a warning that the stated benefits aren't guaranteed. They aren't entitled to anything and the more then insist on receiving every dime they believed they were "promised" instead of making compromises....they worse they will be in the end.
You just can't glut the economy, not save, etc and expect younger generations to bail you out.
It's an unspoken promise, that's why they call it the third rail and your feeling that seniors are not entitled to anything far as SS and Medicare go is specious at best. They deserve every dime that was "promised" to them regardless of what the "fine print" says as long as they held up their part of the bargain. If the government was going to provide an escape clause for itself then it should have have given citizens a way to opt out of the system. Then I could agree with you.
Not exactly, because as I said earlier the inflation rate is a totally fictitious number just like the unemployment number.
There is nothing fictitious about inflation how exactly you measure it is irrelevant to my point . The point is simple, the "average Joe" is knee keep in money illusion. He will think he is wealthier in case #1 even though he is not.
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Originally Posted by thrillobyte
But as I also said younger generations should not even have to be burdened. Your gripe is with the Feds, not old people. Caps need to be lifted off the top wage (108K) taxed; means testing should be in place for the benefits; the age should be gradually raised to reflect growing lifespans, etc. All this can be done without hurting the kids like you.
We live in a representative democracy...the government is an extension of the people and it is the older demographic that largely controls the government. As a result the government creates policies that benefit this cohort at the expensive of younger generations.
Also, lifting caps, raising the age, etc are putting the burden on younger generations. Its a bit mysterious why'd you think otherwise.
In terms of your "tax the rich" approach, why in the world should the wealthy be responsible to fund a retirement system for workers? You are talking about turning social security and medicare into a welfare system....
I also don't get how this isn't going to hurt me. I'm going to pay more social security taxes and I will collect social security at a latter date......
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Originally Posted by thrillobyte
It's an unspoken promise, that's why they call it the third rail and your feeling that seniors are not entitled to anything far as SS and Medicare go is specious at best.
Umm...no, there is no unspoken promise. Not from younger generations, not from the social security administration. The benefits have always been tentative.
Like I said, the more you guys promote this attitude the worse off you'll be. At some point the youth will explode and the result will not be pretty for older generations.
Europe is already starting to get hot and it will just take a spark in the US for similar riots to occur here.
You're barking up the wrong tree user_id! A Boomer, who diligently saves money, while living within his/her means, doesn't fit the Boomer stereotype. As thrillobyte already admitted; the Gov't/People should have adjusted/updated the Social Security/Medicare system to preserve the system for future generations.
Maneuvering through inflation is a sacrifice/skill that can be beneficial to one’s future.
As thrillobyte already admitted; the Gov't/People should have adjusted/updated the Social Security/Medicare system to preserve the system for future generations.
Except that thrillobytes idea of "updating the system" is forcing young wealthy folks to pay dramatically more into the system and forgo benefits via "means testing". Further, he wants to increase the qualifying age on younger folks which will reduce everyone's benefits....despite the fact that the people most dependent on it haven't seen much increase in life expectancy..
No where in thrillobytes comments was there any hint at shared sacrifice.
Anyhow, there is no way to preserve the system for younger generations without reducing boomer entitlements.
At least if you're smart you can go out and get a profession that will earn you 100K and provide a good retirement. Most of us oldsters don't have that opportunity anymore so have a little compassion.
Oh -- but that good retirement is now a CHOICE we have to make. And many people aren't making that choice.
Back in the day when pensions were a given people could spend their paycheck because it was there -- the Daddy company would provide after 65.
I can't tell you how many people I had to talk into contributing to their 401K -- at least to the match.... but they just wouldn't do it. Money stretches, if you are willing to stretch it...
Except that thrillobytes idea of "updating the system" is forcing young wealthy folks to pay dramatically more into the system and forgo benefits via "means testing". Further, he wants to increase the qualifying age on younger folks which will reduce everyone's benefits....despite the fact that the people most dependent on it haven't seen much increase in life expectancy..
No where in thrillobytes comments was there any hint at shared sacrifice.
Anyhow, there is no way to preserve the system for younger generations without reducing boomer entitlements.
Raising the age to qualify for SS is a shared sacrifice. The age has already been raised from 65 to 66. You think that's something today's seniors are looking forward to as they approach retirement???? I'm certainly not!! By the time you get around to retiring, ID, the benefits age might be seventy-two but that's okay because your life expectancy will have gone up to 85 by then as well, which is much like your theory of "what's the difference between 2% interest and 5% inflation and 5% interest and 8% inflation". All the same, right?
...only when the $10,000 he now earns on that declining balance of CD deposits..
yields MORE goods and services (purchasing power) than what the $25,000 he used to earn off a static balance did.
It's no more complicated than that.
But "average Joe" will settle (happily) for a zero sum gain of what he had before.
Am I the only one who realizes it's called FDIC not FICA? Lol
Anyway, to answer your first question: spending money doesn't decrease money supply. Paying off bank-issued debt does, as does physically destroying currency or coins (which is illegal, as an aside).
As for the government controlling interest rates: The Fed tries to control rates but the free market determines the actual rates. Also, when you hear about the FOMC setting interest rates, what they are setting is the Fed Funds TARGET rate. The FFT rate is what they WANT overnight interest rates rates to be; but ultimately it's the free market that determines the actual rate. In Sep-Oct 2008, the actual overnight rate at one point was hundreds of basis points higher than the FFT rate. Obviously the Fed was not able to control the spike in rates.
Raising the age to qualify for SS is a shared sacrifice. The age has already been raised from 65 to 66. You think that's something today's seniors are looking forward to as they approach retirement???? I'm certainly not!!
Except, of course, that when the qualifying age is increased it only effects younger people.
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Originally Posted by thrillobyte
By the time you get around to retiring, ID, the benefits age might be seventy-two but that's okay because your life expectancy will have gone up to 85 by then as well...
Personally I don't care about social security benefits, its just a drop in the pocket.
In terms of life expectancy, its a terrible measure to used to determine benefit levels. The life expectancy increases have not been equally distributed (most of the gains are in higher-income groups...those that don't depend on social security), not only that a longer life expectancy doesn't imply a greater ability to work after some age. That is, though people are living longer their bodies (and mental abilities) decline just the same after around 60....
Raising the qualifying age for younger generations is just a way to steal from younger generations.
Caps need to be lifted off the top wage (108K) taxed; means testing should be in place for the benefits; the age should be gradually raised to reflect growing lifespans, etc. All this can be done without hurting the kids like you.
Lifespans are not growing for all Americans. What do you say to those whose lifespans are not growing when they get shortchanged by raising the retirement age?
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I'm certainly not!! By the time you get around to retiring, ID, the benefits age might be seventy-two but that's okay because your life expectancy will have gone up to 85 by then as well, which is much like your theory of "what's the difference between 2% interest and 5% inflation and 5% interest and 8% inflation". All the same, right? 
