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It's Not Just Us
Britain Has the Pension Blues, Too

The blue social model is under strain across the Western world, from U.S. state and local public sector pensions to Spain’s social insurance system to Britain’s defined-benefit retirement programs. Bloomberg reports:

Britain’s millennials, already suffering for the economic mistakes of the past, now face the prospect of having to pay for the country’s future.

Pension-fund liabilities in the U.K. increased to a record 1 trillion pounds ($1.3 trillion) after the Bank of England’s interest-rate cut this month, hurt by quantitative easing and razor-thin yields. It’s Britain’s version of what Duquesne Family Office LLC Chairman Stanley Druckenmiller calls “Generational Theft” in the U.S. […]

“Savers in pension funds are being forced into ultra-low yielding securities, which will inevitably post losses over the medium term,” Mark Dowding, a partner at BlueBay Asset Management LLP, said on Monday. “This is not a healthy situation.”

Like the U.S. Federal Reserve, the Bank of England has kept interest rates low in the wake of the Great Recession in an effort to force the fragile recovery to pick up steam. This is almost certainly boosting economic growth and staving off recession, but it is also making both countries’ fiscal-demographic tsunamis more devastating in the long run. Whether or not this tradeoff is wise, it points to deep structural challenges to the social model Westerners have been taking for granted since the Second World War.

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  • Anthony

    “…What’s distinctive about today’s economic situation is that the problem is global. Almost every major country suffers from reduced economic vigor.” http://www.realclearmarkets.com/articles/2016/08/15/the_stimulus_wore_off_what_now_102305.html

    • seattleoutcast

      It could simply be that Keynesian economics doesn’t work. 27 years into the Japanese recession and it has still failed to revitalize their economy. But rather than learn that lesson, we prefer to double down on economic theory and apply epicycles and other widgets to justify the erroneous theory.

      • Anthony

        That’s an offered view.

  • rheddles

    Like the U.S. Federal Reserve, the Bank of England has kept interest
    rates low in the wake of the Great Recession in an effort to force the
    fragile recovery to pick up steam. This is almost certainly boosting economic growth and staving off recession,

    What a crock. The economy hasn’t picked up steam in 8 years. Sure it hasn’t crashed, but is that a good thing? Assets have not been reallocated to more productive uses. GM is alive. And still producing t-rds. And the elite who got us into this mess are still in charge. The Fed’s easy money policies have protected Wall Street and screwed Main Street. This is almost certainly boosting tempers across the real world and staving off the realignment that needs to occur.

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