Saturday 1 September 2012

"Pensioners The Biggest Winners" !?!

Property prices stirred up the comments in no uncertain terms  - so how about another incendiary topic:  the Bank of England thinks that pensioners are the biggest winners from QE.

Discuss, as they say.  Or, in the vernacular - WTF ?

I'll start the ball rolling with a modest kick.  At a basic level it is surely obvious that pensioners (and savers generally) have been, and will continue to be, afflicted by dreadful depredation as the can is booted ever further down the road.

However ... the fact is, pensioners as a class are generally the least-well placed to survive a serious outbreak of social breakdown. Imagine, for example, how granny will fare as she wheels her trolley out into the supermarket carpark when the anarchy really starts. Or when the shelves are actually bare ...

So - to the extent that pensions and savings are raided and raided again to keep the show on the road, rather than confront the Dreadful Truth in a decisive showdown (as some C@W commenters advocate) - perhaps it is in the old dears' best interest after all.  

What do we think ?



Tim Worstall said...

That study did a bit of sleight of hand.

QE has indeed benefitted pensioners by raising asset prices.

But overall pensioners have been entirely screwed by the lowering of interest rates. The study did actually point this out but everyone's been ignoring the point.

They've deliberately split policy into QE and not QE, and not really pointed to hte way in which not QE screwed pensioners a great deal more than QE helped them.

Lord Blagger said...

Biggest winner?

Mervyn King and his insider trading.

He switched the BoE pension fund to index linked Gilts at the same time they let inflation rip.

Christie Malry said...

I think that it's very insulting on those who might have retired on fixed incomes, or who are approaching retirement with fear as they see annuity rates plummet even further.

It would be bad enough, only the officials that are making these appalling claims are themselves shielded from the impact of inflation on their own, defined benefit, pensions. Any shortfall on their pensions will be, of course, made up by the taxpayer.

hatfield girl said...

' survive a serious outbreak of social breakdown.'

'Minor' outbreaks of social breakdown are with us now - a friend reports that the local Ventimiglia - Nice train was robbed from end to end early on Tuesday evening, wallets, watches, jewels, gold removed from threatened and beaten passengers - and are bordering on serious. I wonder if we aren't living in flammable conditions already.

Budgie said...

In one of Philip K Dick's novels the elected president had to wear an explosive collar: if he stopped getting adequate support from the population he automatically got his head blown off. That made the president very very careful.

In the 60s 70s and 80s the trades unions undermined wealth and order. In the 80s 90s and 00s yuppies and banksters took their place. But I believe it is politicians who are fundamentally responsible.

Politicians not only make the rules (too many rules!) the rest of us have to obey, they also set the tone. Of the last parliament (of which many are back now), given the fraud, 500 - 600 should have been jailed and barred from public office.

Brown decimated pensions and savings. Can we jail for incompetence? Yes, given that bad drivers are already prosecuted. There is a case against Brown for knowingly taxing pension interest and also using the Chinese Prices Index to regulate mortgages, to the subsequent detriment of house owners, pensioners and savers.

Demetrius said...

In my Friday post I drew attention to an item from Automatic Earth on the Demise of Pensions. If during a period of inflation the price of any assets rise this does not "increase" wealth unless those prices can go rather higher. Which they have not. As for incomes they are going down in real terms faster than a pensioners expectation of life.

Bill Quango MP said...

Hatfield Girl.
I was on a Ventimiglia Nice train a few weeks ago. Covered end to end in graffiti and not a working toilet on the train. And the aircon was out in half the carriages. I assumed a soccer match.

DJK said...

What was missing for me from the BofE analysis was that although it's just possible that pensioners in aggregate have benefited from QE, that's to ignore the fact that pensioners are not a homogeneous group. A few, very wealthy, asset-rich oldsters becoming even richer does not make up for the many poor pensioners (perhaps the majority?) becoming even poorer.

1,000 people gaining £1M each does not make it alright that 1,000,000 people lose £500 each. (Made up numbers).

Electro-Kevin said...

Wot DJK said.

We are seeing a divide by which a few will get incredibly rich and the rest of us will get much poorer.

Was QE good for pensioners because it prevented them from being robbed ?

There is much about Britian that they could have done without.

The nation was far poorer than it is now, when it was at its most law-abiding and gentle and it has come to a sorry pass when taxpayers have to stump up protection money to pay to the underclass, "...or else."

Most of our problems have been born of contempt for the older generation and their 'fuddy-duddy' values.

grumpy old g.. said...

"Most of our problems have been born of contempt for the older generation and their 'fuddy-duddy' values.

How right. 2000 years of history had created a society that respected the old as being wise and knowledgeable, they having seen it all before. We also had a society where we saved for our old age, and were prudent with money, debt was seen as a bad thing.
How the last 30 years have changed our society.
Now you must spend all you earn and more, for the benefit of the country, saving is pointless anyway since if inflation or taxes don't destroy the value of the savings then the bankers charges and fees will. When you reach old age you are deemed past it and of no use, as this process accelerates who will be the first to suggest lining us up and shooting us.

Anonymous said...

What they mean is that their pensioners have come out very well over QE, so they think every pensioner is in the same boat, same as our dear politicos, "leading lights"

andrew said...

In the sense that about 100 years ago, there were not many pensioners in their 60s and over as they were dead, they are right.
In the sense that the rich asset-holding classes (pensioners or not) have done better than those without assets, they are right.
Pensioners with no assets or income - completely reliant on the govt have benefited not for QE but from other govt policies - so from a point of view, they are correct.

It is just the middle 60% or so that have/ are suffering.

Elby the Beserk said...

Pensioners? Government's ATM. Need some money? Screw the pensioners? Need some money? Nick their pensions.

Anonymous said...

The trick is surely not to invest your pension in government bonds (which are being repaid with printed money), but instead to invest in the direct beneficiaries of QE which are the banks. Pensioners need to surf the wave of QE with their annuities, rather thank sink under all that freshly printed cash.

QE simply means there's more cash in the system - you just have to make sure some of it comes your way surely?

Anonymous said...

Don't forget that rising GDP during the Blair years boosted hugely by debt would have had a very positive impact on pension funds and the state pension before the credit crisis. That was why Brown taxed them in the first place.

The net effect over time will be zero. Debt giveth and debt taketh away. Problem is that people only complain about the debt taketh away part. Nobody complained during the "boom" years.

Blue Eyes said...

Re bare shelves, remind me around December time to invite you to a 2012 recap at the same pub we were at in December-ish 2011. Assuming the lights are still on, that is :-D