|Older people a burden on America?
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- By Bill Bonner
Stocks up a bit yesterday. Gold down a bit.
Yesterday, we spent the day riding up to 'Tacana.' So few people have actually been there, we thought it might be a ranch myth.
More about that on Monday.
Meanwhile, our last Diary recounted what a flop the 21st century has turned out to be. We focused on the economy. We might just as well have looked at education or health care... or human liberty, safety, or politics or warfare.
Almost everywhere you look things appear to be degrading. We are less rich, less free, less safe and probably less smart than we were 15 years ago.
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But some things are easier to measure than others. You can't measure real well-being or happiness, for example, but you can measure disposable income. In America, most people have less money to spend than they did in the last century. But for all we know people are happier now than ever, but if they are, they should probably have their fool heads examined.
In any event, yesterday, we promised to look at "why"...that is, we offered to present an explanation. Why is the 21st century such a disappointment?
Of course, no one knows. But in one of our recent Bill Bonner Letters, we proposed one hypothesis: people are getting older. Not that getting older is a disappointment in itself. Just the contrary, people are usually more disappointed when they are not able to grow older. Death is the only alternative we know of, and most people try to avoid it.
Nevertheless, we proposed that aging populations naturally slow down the rate of economic growth. This theme was distasteful to some of our older subscribers, who preferred not to think of themselves as a drag on the world economy. Still, the idea is gaining traction in the mainstream press. Widely reported on Tuesday, including in the Wall Street Journal was a 'study' from the IMF suggesting that "aging populations and low productivity will combine to reduce output growth."
We mentioned yesterday how it was hoped that new technology - especially the internet -- was supposed to remove the "speed limits" to growth. This new technology was supposed to allow us to create wealth - like the central bank - without saving money or breaking a sweat. Not only that, it would help us to live forever too, just like the gods.
But here it is 2015 and the speed limits are still there, and they're going lower. The IMF says that old people impose slower speed limits on an economy.
"An economy's speed limit dictates how rapidly it can expand its production of goods and services without increasing inflation. ...The evidence presented in the study suggests that absent policy action to encourage innovation, promote investment in productive capital, and counteract the negative impetus from aging, countries will have to adjust to a new reality of lower speed limits.
If old people are a drag on progress, technology that helps old people get older is not a formula for economic success. In fact, as people live longer, they consume not only their own savings but those of others' too.
Besides forgetting things and spending money that is not theirs, old people also start few businesses, invent little, and hold onto existing jobs like a dog with a bone. On this last point, it is worth noting that the over 55 group is the only age group to gain jobs since the crisis of '08. Every other age group lost jobs.
Why? They desperately need the money, may be one answer. But they also have better work histories, more connections, and more experience with the old businesses, old products, and old companies that dominate the economy.
We could have mentioned the falling rate of business start ups as more evidence of a slumpy century. It is both cause and effect of economic stagnation. But first, let us look at what is happening in the world of entrepreneurship. Inc magazine:
The U.S. startup rate has been falling for decades. The Kauffman Foundation, citing its own research and drawing on U.S. Census data, concluded that the number of companies less than a year old had declined as a share of all businesses by nearly 44 percent between 1978 and 2012. And those declines swept across industries, including tech. Meanwhile, the Brookings Institution, also using Census data, established that the number of new businesses is down across the country and that more businesses are dying than are being born. All this at a time when entrepreneurship had reached its cultural apex and was widely viewed as the sole sizzling ember in an otherwise cooling economy. The business and academic worlds were left slack-jawed: How could this be?
As a percentage of existing businesses, the number of start ups has declined 44% since 1978, says INC. So far this century, it's still going down.
As the number of start-ups goes down, the business world, like the political world, comes to be dominated more and more by old people who control old companies.
These old companies are then in a position to use the Fed's cheap credit. They have collateral. They have connections. They have what it takes to lay their hands on the free money; the little guys don't.
Then, without the little guys, there are few growing businesses with new products hiring new people and winning new customers. The whole economy creaks and groans. Old people, loyal to old products, put out by old companies, with almost limitless funding from old investors and the old economists running the central bank that was set up 102 years ago.
Of course, there's more...
It's not just old people who are slowing down the economy...
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.
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