The sell-off of pensions continues
The German government allegedly wants to gamble on the stock market to secure the state pension. According to Tagesschau reports, it plans to sell government bonds for twelve billion euros each year and use the money raised to buy shares. This amount is to increase by three percent every year. The speculation is that the return on the shares will be higher than the interest payable on government bonds. It is completely open as to whether this will ultimately result in a profit or a loss for the pension fund.
By Konstantin Schink
By Konstantin Schink
Those who will definitely make big profits are the banks, which will buy the federal bonds from the state and collect the interest payable on them. The group of bidders for federal issues includes 32 large banks, including Deutsche Bank, Commerzbank, J. P. Morgan, Bank of America and Goldman Sachs, which can bid for bonds directly on the primary market.
Let's assume that the traffic light is not interested in patronage politics for financial capital, but actually in securing the statutory pension: The idiocy of this undertaking by generational capital in this case becomes clear when you realize the macroeconomic context. Every generation of pensioners lives from current economic production. Today's pensioners live off today's production and pensioners in 50 years' time will live off production in 50 years' time. An economy as a whole cannot save, at least if one assumes a balanced current account. This simple fact, which was also known to the fathers of the 1957 pension reform, is called the Mackenroth thesis after the German sociologist Gerhard Mackenroth.
This reform, which was also carried out by the Adenauer government on the basis of this theorem, linked pensions to wage growth and thus ensured that pensioners received their share of growing production as long as wages were raised in line with productivity increases, which was also the case until the 1970s.
Every year there is a certain growth in economic production. This growth is then divided into the returns of the owners of capital, the wage increases of workers and the increase in transfer payments to the sick, unemployed, pensioners and others who receive welfare state benefits.
If the proportion of pensioners in the population grows, then pensioners must receive a larger share of production if the pension level is to remain constant. If economic growth is higher than the growth in the number of pensioners, pension financing is simply a distributional conflict of additional income. In 1950, according to the Federal Statistical Office, there were 5.6 million people aged 67 or over. By 2022, this number had tripled to 16.5 million, which corresponds to an average growth rate of 1.5% per year. In the same period, real economic output grew by 3.1% per year, which is significantly more than the number of people over 67, which will increase by 0.4% per year to 20.4 million by 2070. These figures show us two things:
1. demographic change is slowing down. The number of old people will increase less in the coming decades than in the past. The proportion of people aged 67 or over has grown from 8% (1950) to 20% (2022) and will increase to 27% by 2070.
2. no one needs to become poorer in order to continue to finance pensions. Economic growth of around 1% per year is a realistic figure for an industrialized country, which Germany can achieve without much effort. And even such low growth would be two and a half times higher than the growth of people who are 67 and older.
It would therefore be possible to safeguard or even increase the pension level within the statutory pension without any problems. The government could, for example, increase the federal subsidy, levy social contributions on capital income, include civil servants in the statutory pension scheme or abolish the contribution assessment ceiling. There would be many possibilities for sensible reform or expansion of the statutory pension, especially without a few large banks making money.
However, 20 years after the Riester pension, where around one in four euros ends up in the pockets of insurance companies, the Ampel is planning to turn the German pension system once again into a bubbling source of private profit that we will all ultimately have to pay for.
To conclude today's article, I would like to recommend the latest commentary on generational capital by economist Friederike Spiecker, who deals with current economic policy issues on her channel: SpieckersCorner: Pension rescue through generational capital? (youtube.com)
Quellen
What the coalition\\\'s pension package should look like | tagesschau.de
Bidder Group - German Finance Agency (deutsche-finanzagentur.de)
Population pyramid: Germany\\\'s age structure from 1950 - 2070(destatis.de)
Gross domestic product grew by an average of 3.1% per year from 1950 to 2022 - Federal Statistical Office
Riester: lots of fees, little pension
25.03.24
Konstantin Schink (born November 8, 2001) graduated from high school in Lower Saxony in 2021. He is currently studying economics and politics in the 2-subject bachelor's program and runs the YouTube channels "Agitator of the Social Market Economy" and "Secondary Agitation."
Let's assume that the traffic light is not interested in patronage politics for financial capital, but actually in securing the statutory pension: The idiocy of this undertaking by generational capital in this case becomes clear when you realize the macroeconomic context. Every generation of pensioners lives from current economic production. Today's pensioners live off today's production and pensioners in 50 years' time will live off production in 50 years' time. An economy as a whole cannot save, at least if one assumes a balanced current account. This simple fact, which was also known to the fathers of the 1957 pension reform, is called the Mackenroth thesis after the German sociologist Gerhard Mackenroth.
This reform, which was also carried out by the Adenauer government on the basis of this theorem, linked pensions to wage growth and thus ensured that pensioners received their share of growing production as long as wages were raised in line with productivity increases, which was also the case until the 1970s.
Every year there is a certain growth in economic production. This growth is then divided into the returns of the owners of capital, the wage increases of workers and the increase in transfer payments to the sick, unemployed, pensioners and others who receive welfare state benefits.
If the proportion of pensioners in the population grows, then pensioners must receive a larger share of production if the pension level is to remain constant. If economic growth is higher than the growth in the number of pensioners, pension financing is simply a distributional conflict of additional income. In 1950, according to the Federal Statistical Office, there were 5.6 million people aged 67 or over. By 2022, this number had tripled to 16.5 million, which corresponds to an average growth rate of 1.5% per year. In the same period, real economic output grew by 3.1% per year, which is significantly more than the number of people over 67, which will increase by 0.4% per year to 20.4 million by 2070. These figures show us two things:
1. demographic change is slowing down. The number of old people will increase less in the coming decades than in the past. The proportion of people aged 67 or over has grown from 8% (1950) to 20% (2022) and will increase to 27% by 2070.
2. no one needs to become poorer in order to continue to finance pensions. Economic growth of around 1% per year is a realistic figure for an industrialized country, which Germany can achieve without much effort. And even such low growth would be two and a half times higher than the growth of people who are 67 and older.
It would therefore be possible to safeguard or even increase the pension level within the statutory pension without any problems. The government could, for example, increase the federal subsidy, levy social contributions on capital income, include civil servants in the statutory pension scheme or abolish the contribution assessment ceiling. There would be many possibilities for sensible reform or expansion of the statutory pension, especially without a few large banks making money.
However, 20 years after the Riester pension, where around one in four euros ends up in the pockets of insurance companies, the Ampel is planning to turn the German pension system once again into a bubbling source of private profit that we will all ultimately have to pay for.
To conclude today's article, I would like to recommend the latest commentary on generational capital by economist Friederike Spiecker, who deals with current economic policy issues on her channel: SpieckersCorner: Pension rescue through generational capital? (youtube.com)
Quellen
What the coalition\\\'s pension package should look like | tagesschau.de
Bidder Group - German Finance Agency (deutsche-finanzagentur.de)
Population pyramid: Germany\\\'s age structure from 1950 - 2070(destatis.de)
Gross domestic product grew by an average of 3.1% per year from 1950 to 2022 - Federal Statistical Office
Riester: lots of fees, little pension
25.03.24
Konstantin Schink (born November 8, 2001) graduated from high school in Lower Saxony in 2021. He is currently studying economics and politics in the 2-subject bachelor's program and runs the YouTube channels "Agitator of the Social Market Economy" and "Secondary Agitation."
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