webmaster Posted November 6, 2006 Report Share Posted November 6, 2006 (Some Intriguing thoughts / from GaveKal Research): ==Demography & Savings== Q1: Who, in the Western World, has the worst savings rate? the US. Q2: Who has the highest savings’ rate? Japan, Italy and Germany… Q3: Who has the best demographic trends? the US. Q4: Who has the worst demographic trends? Japan, Italy, Germany… Putting it all together, we then pondered whether the fact that the highest savers in the world also have the worst demographics is a pure co-incidence? We concluded that it wasn’t, for the following reasons: Kids... cost money. So if nothing else, we should expect people that do not have kids to save more than people who do. Secondly, at different ages, people offer very different consumption patterns. Young people (and societies) tend to consume a lot of goods (TVs, cars, ovens…). Meanwhile older people tend to consume services (opera tickets, cruises, hip replacements…). Now in countries such as Japan, Germany, etc… the “expensive services” (namely healthcare) are delivered by a government monopoly. So what can old people do with their money except save it? Your average septuagenarian is not buying a flat screen or an ipod… Thirdly, and staying with the above idea, in most Western economies the social benefits (pensions, healthcare…) on which old people rely are typically dependent upon a growing population. Today’s young pay for today’s old in an intragenerational show of solidarity. But what happens when the young people start to disappear? Who then pays for the old people? This is not a moot point: in Japan, Germany and Italy, the populations have started to shrink. So one might think that people in these countries are right to save; for if they plan to rely on the payments’ from young people to see them through their old age, they will be mightily disappointed. In other words, given a) how most of our welfare states have been organized and the rapidly deteriorating demographic situation, people in the countries with ageing and shrinking populations need to save if they want to ensure a decent standard of living that the state will simply not provide. Finally, and just as importantly, having kids has historically always been a guarantee for one’s old age. Indeed, even though Victor Hugo once said: “a father can feed eight kids, but eight kids cannot feed one father”, people have often had kids to ensure that when they grow old, they will be taken care of (this, at least, has been Charles’ strategy and, so far, it seems to be working…). In other words, when you have kids, you don’t need to save as much since you have a “moral claim” on a small part of your children’s future earnings… = = (Methinks that is very dangerous thinking. What if the children do not honor that "moral claim"??) Link to comment Share on other sites More sharing options...
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