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Greece and the economic outlook

by seasoned
9 replies
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Apparently, Greece had a GREAT, for the retired, pension fund. They just made it a LOT closer to the US social security!

IWSM...

Steve

Economic Outlook: Fiscal options
Economic Outlook: Fiscal options
Jul. 9, 2010 (United Press International) -- What if they gave an economics class, somewhere in the future, and Greece was pointed out as a model of fiscal efficiency?

No, it's not there yet. But Greece Thursday managed a political and economic coup that involved an overhaul of the pension fund system that has been coupled with words like "laughable" and "enviable" and the much more relevant "unsustainable" for many years.

Prior to Thursday's overhaul, many Greeks retired before they turned 50 and had government checks in the mailbox based on their best earning year, using a system that incorporated bonus pay in the calculation.

In one fell swoop Thursday, the system was changed to a retirement age of 65 for men and women with pension checks based on base salaries. As an extra measure, the overhaul of the pension system makes it easier to fire workers, The New York Times reported.

There are numbers relevant here, including members of Parliament who voted 157-134 to approve the package and 12,000 -- the estimated number of protesters that marched in Athens Thursday.

That means Prime Minister George Papandreou appears to have survived one of the most politically unappealing concepts: Cutting back.

Analysts say the spending cuts put Greece in compliance with International Monetary Fund and European Union stipulations for receiving a second installment of international bailout loans. But the bigger question is whether Greece will, despite all, need to restructure its debt. Its economy shrank 2.5 percent in the first quarter and, if it continues, is deeply unsustainable.

Now, class, a look at the United States, the professor might say.

The IMF Thursday said the U.S. budget was about $350 billion out of balance and some combination of spending cuts and tax hikes need to be passed.

Their suggestions included taxing gasoline and dropping the federal tax deduction for interest payments on home loans, The Washington Post reported.

Say what, again?

During the Fourth of July weekend, Chrysler ran an advertisement that said, in patriotic tones, America got two things right: "Cars and freedom."

And then, of course, the American dream, in so many words, has always been about home ownership. This is a country where you're expected to put four stakes in the ground, run twine around them and build a home, which means at least low interest rates, a tax deduction on interest paid on mortgages, and cheap gas to get to the grocery store.

In the larger picture, the requisite flip-flop is that the United States needs to start saving and China and Germany and other export-positive countries need to start buying more.

The difference, the Post pointed out, is that the IMF is projecting U.S. economic growth at 2.9 percent in 2011, while the Obama administration is expecting growth of 4 percent next year and for the foreseeable future.

So, the question stands: Is the difference in growth expectations enough to make up the $350 billion? Time will tell.

In international markets Friday, the Nikkei 225 index in Japan rose 0.52 percent while the Shanghai composite index in China added 2.31 percent. The Hang Seng index in Hong Kong rose 1.64 percent while the Sensex in India rose 1.03 percent.

In Australia, the S&P/ASX 200 added 0.91 percent.

In midday trading in Europe, the FTSE 100 index was up 0.35 percent while the DAX 30 in Germany gained 0.5 percent. The CAC 40 in France was ahead 0.46 percent while the pan-European DJ Stoxx 50 rose 0.41 percent.




Source: United Press International (July 9, 2010 - 8:43 AM EDT)

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  • Profile picture of the author Bill Farnham
    Steve,

    I grew up in the DC area and the predominant thought pattern in my generation and the one before was to get a gubberment job, put your 20 years in so you get three quarters of your pay for retirement and then get another gubberment job for another 20 years and then draw retirement from both jobs for an astronomical retirement package.

    If you knew how many folks did this you would have a conniption fit.

    ~Bill
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    • Profile picture of the author seasoned
      Originally Posted by Bill Farnham View Post

      Steve,

      I grew up in the DC area and the predominant thought pattern in my generation and the one before was to get a gubberment job, put your 20 years in so you get three quarters of your pay for retirement and then get another gubberment job for another 20 years and then draw retirement from both jobs for an astronomical retirement package.

      If you knew how many folks did this you would have a conniption fit.

      ~Bill
      If I knew how many did it!?!?!? That is ONE of my beefs with politicians! THEY do this! And I have heard they do NOT need to be in for 20 years! Still, in the US, that was only with the "public sector", and most union jobs, excluding some very high paying corporate ones. AGAIN, I'm squeezed in the middle here.

      For the middle, we have what WE managed to keep and "social security". Apparently, most only have "social security".

      Steve
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      • Profile picture of the author Kurt
        One problem with SSI is actually kind of simple...They picked 62 as the retirement age because that was the average life-span for Americans in the 1930s when FDR passed SSI. We live 16 years longer now, which is 25% longer.

        The obvious solution is to raise the retirement age. However, where are 68 years olds going to get a job, other than handing you shopping cart at Walmart? And for every senior that keeps working, they will take a job from someone younger.

        I would probably suggest something like partial SSI payments from 62-67, so seniors can maybe cut back on hours, but get a little extra. It's sad but it's also true, we can't keep doing what we're doing.
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        • Profile picture of the author seasoned
          Originally Posted by Kurt View Post

          One problem with SSI is actually kind of simple...They picked 62 as the retirement age because that was the average life-span for Americans in the 1930s when FDR passed SSI. We live 16 years longer now, which is 25% longer.

          The obvious solution is to raise the retirement age. However, where are 68 years olds going to get a job, other than handing you shopping cart at Walmart? And for every senior that keeps working, they will take a job from someone younger.

          I would probably suggest something like partial SSI payments from 62-67, so seniors can maybe cut back on hours, but get a little extra. It's sad but it's also true, we can't keep doing what we're doing.
          Kurt,

          You are basically saying that they should make sure NOBODY can collect on their promise. I have a FANTASTIC solution! It:

          1. Lowers costs.
          2. makes government more honest.
          3. Gives people more money.
          4. Gets rid of a lot of animosity.
          5. Increases the ability of poor people to survive.
          6. Improves vacations.
          7. Lowers inflation!!!!!!
          8. reduces payroll problems/questions.

          WOW, you say!? HOW do you do it!?!?!? Well, if you never plan to pay, there is NOTHING to pay! If there is nothing to pay, you don't have to collect!

          PROBLEM SOLVED!!!! BTW they have had partial payments for 2+ decades! My MOTHER took that option. She retired early, so she gets less for the rest of her life.

          BTW the REAL problem is that they collected VERY little when they started. FAR less than now, EVEN as a percentage, and they started paying out FAR too quickly. OH, AND they stole from the fund. Had they not done that, it probably could have run forever. ALAS, we are probably paying the debt of our grandparents EVEN as we pay for our parents. And the amount of money is PALTRY!

          Steve
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          • Profile picture of the author Kurt
            Originally Posted by seasoned View Post

            Kurt,


            WOW, you say!? HOW do you do it!?!?!? Well, if you never plan to pay, there is NOTHING to pay! If there is nothing to pay, you don't have to collect!

            ...

            BTW the REAL problem is that they collected VERY little when they started. FAR less than now, EVEN as a percentage, and they started paying out FAR too quickly. OH, AND they stole from the fund. Had they not done that, it probably could have run forever. ALAS, we are probably paying the debt of our grandparents EVEN as we pay for our parents. And the amount of money is PALTRY!

            Steve
            WOW! You really did it! You solved that ever pesky problem of collecting money in your golden years! Someone needed to protect our seniors from collecting money...

            And Steve, thanks for the second paragraph and stating the OBVIOUS. BTW, a major reason "they" didn't collect enough is because people are outliving the purpose SSI was intended, as I posted.

            Now back to your original post. I thought you were specifically told not to use "I could say more", as it is inciteful? Not to mention this entire thread is nothing BUT political.
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            • Profile picture of the author HeySal
              Originally Posted by Kurt View Post

              WOW! You really did it! You solved that ever pesky problem of collecting money in your golden years! Someone needed to protect our seniors from collecting money...

              And Steve, thanks for the second paragraph and stating the OBVIOUS. BTW, a major reason "they" didn't collect enough is because people are outliving the purpose SSI was intended, as I posted.

              Now back to your original post. I thought you were specifically told not to use "I could say more", as it is inciteful? Not to mention this entire thread is nothing BUT political.
              I don't see it as political. There is nothing bipartisan here. When you talk about retirement, pensions, it should be considered FINANCE. The fact that finance even has to mention government in a "free enterprise" system is a huge signal of trouble.

              Had SS been used and managed as it should have been instead of treated like a ponzi scam, there would be plenty of time to set up investment, etc. to cover dwindling coverage -- unfortunately, people couldn't keep their hands off it and spent it on things other than what it was intended for.

              It used to be that women did not work whether by choice or by dictate and if husbands died or just left they had no way to care for themselves. So SS from its inception was meant to take care of those who never worked. Suddenly practically the whole population was holding jobs so a very much larger percent of the population was contributing than had ever been expected. Yet the system is broke and the reasoning being given is that there's a major amount of old people now. Yet for the last 30 - 40 years almost that complete number of baby boomers has put into the fund that was originally intended to receive funding from the male half of the population whether people are living longer or not.

              Also figure that while both husbands and wives get charged SS tax - if they are married they don't make as much back as they would if they were co-habitating singles, so more are putting in with less being drawn out. Some older couples actually get divorced so they can get their full entitlement. But just the hundreds every month being denied to couples who both worked is balancing the "boomers" some.

              The only reason this retirement system is broken is because it was miss-managed and looted.
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              Sal
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  • Profile picture of the author seasoned
    I didn't mean it to be political. SSI was supposed to provide some way of having a modest living when you retired. And they even had to pass agism laws to protect people that were middle aged.

    I simply saw the bit of news, on an investing site, and thought it interesting. Greece is becoming more like we are, and people are fearing that we are heading down the same path greece did. I wonder if it will ever go in cycles so quickly that people will feel like they are in a whirlpool.

    Sorry, if I just don't like the way these things are going. Whether it goes under, or I die first, there is a fair bet I will never get to see it.

    Steve
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  • Profile picture of the author seasoned
    Heysal,

    Thanks, that is the way I saw it. I mean if everything that touches on poitics were banned, we couldn't talk about BP, or even about various laws. The social security problems have been around for most of its existence. It is simply that the baby boomers will stress it more than ever before.

    As for your example about women not working, women DID have jobs they could be in, and if a husband died, the wife got everything, so it wasn't quite the burden on the system you imply.

    OH, and I have paid into it for about 30 years, and am one of the youngest baby boomers, so I will likely be among the first to feel the FULL impact of the population shift, if I am still around.

    Steve
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  • Profile picture of the author sarahberra
    Yikes. I haven't heard a lot about Greece. This is going to trickle down and affect all of us.
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