I Think A LOT About The Future of Retirement
I imagine you do the same. Unfortunately for me, and maybe not for you, I was blessed(cursed) with a contrarian gene at inception. Not sure why but I’ve always had a need to try to poke holes in prevailing conventional wisdom.
For instance, even though I was raised in Maine, I never liked the Celtics growing up. The Lakers were my team. Not anymore, mind you. I really don’t pay any attention to sports these days. I’m way too busy doing other(productive) things.
I also always rooted for the black quarterbacks from the 70s and 80s. Vince Evans, James Harris, Doug Williams etc. When Doug Williams left the NFL to go to the USFL’s Oklahoma Outlaws they immediately became my team.
I’ve never understood the fascination with pop music. I’d gladly pay a hefty fee to listen to Al Gore lecture me on the horrors of fossil fuels as opposed to listening to ANY pop music even if you paid me. Just horrible stuff.
Now, when it comes to my chosen field of study, retirement planning and economics, I can’t help but stand against the conventional wisdom, which is profitable for me because it is frequently wrong.
I know this is hard to believe but there are way more Marxist professors in economics departments than basic Friedman acolytes. Yes, actual MARXISTS are prominent on college campuses, even in economic departments. Marxism, the ideology of Guevara, Mao, Stalin, Chavez and apparently the new President of Peru, etc…. is what dominates in the higher education realm.
For me to stand against Marxism is easy. Because Marxism is evil. But just because Marxism is wrong doesn’t automatically mean Friedman is right. And this is where my contrarian gene keeps me up at night. Marx is wrong. Check. But what if Friedman is also wrong, where does that leave us?
The Austrians? Yessss….but. They make a lot of the same mistakes as the Monetarists (The Friedman school). So if they’re wrong too, what then? And this is why Richard Koo’s book “The Holy Grail of MacroEconomics: Lessons from Japan’s Great Recession” is a must read.
Government spending leads to inflation? Does it? Explain Japan.
Why didn’t our own Titans of Industry and Economics understand what mark-to-market accounting would do to the US given the example of Japan, well before it caused our own Great Recession?
What happens to an economy if people no longer borrow and spend?
These are just three of the many, many tidbits I’ve gathered, and ponder about incessantly, from reading Koo’s book. The problem of course is while Koo identifies what happened in Japan, remember hindsight is always 20/20, his prescriptions really haven’t been as helpful. Japan is STILL at low growth, negative interest rates, Debt-to-GDP well above 200%, low unemployment, demographic decline. None of this makes sense. Yet here we are.
On a side note, China is also in a demographic death-spiral. Their population is projected to be around 750 million by the end of this century. Think that’s fanciful? How else can you explain not only their giving up their evil one-child policy, but now they’re okay with three kids. Yeah, there’s a reason for that.
All the economic textbooks in the world are silent on demographic decline. What happens when populations age?
And this is where the second book you MUST read comes in; Frederick Vettese’s book “The Essential Retirement Guide: A Contrarian Approach”.
“(t)he steady consumption hypothesis is soundly refuted by the data. Consumption falls significantly in real terms throughout one’s retirement years”(70).
“We now have substantial evidence that declining consumption among the elderly is a phenomenon that spans countries as well as time”(73).
Are you getting this??? Evidence, overwhelming evidence, shows that the older people get the less they spend. The most economically vibrant countries in the world, The West and Asia, are aging rapidly and are going into population declines like never before seen in human history. Are there ANY economics or retirement planners talking about this? Hardly. They’re all too busy discussing the ramifications of government spending and how to hedge against what they believe is certain inflation.
But what if they’re wrong? As evidence shows they will be.
What if they’re right?
And that’s the conundrum I find myself in. There is NO right answer. We simply don’t know what we don’t know. And while I’d love to be the smartest guy in the room and say “I told ya so” in 20 years. I am not confident enough to say “you should do this…and not that.” No way, Jose. I’m a squish that says, “You should do BOTH…just in case.”
Pay off debt, keep some cash, keep some bonds, keep some stocks. Done and done. And go on to your day watching the bottom line. Don’t lease fancy, schmancy vehicles. Do go for a walk, get dirty in the garden, watch the crap you put in your body, and love Jesus. There literally is nothing else you can do.