effect of USA not saving vs Germany 13% savings

[bimetalaupt]

Frank,
The age of 70.5 came up as a target.. After 65 you do not get a lot of extra income , so why not make it dollar greater if you retire later..

Bruce

[bimetalaupt]

THE BUNDESBANK is one of the wonders of the Wirtschaftswunder that was ushered in by Ludwig Erhard's great reforms of 1948. Before the establishment of the Bundesbank in 1957, the Bank Deutscher Lander, a creation of the allied military government, had emphasized the importance of monetary policy in ensuring price stability. Both banks owe their independence and prestige to two catastrophes. The first was the great hyperinflation of 1920-23. This expropriated the wealth of the German middle classes and paved the way for Hitler; the gutter became the government. The second catastrophe was the hyperinflation of 1945-47--a consequence of the massive deficit financing of World War II. The Reichsmark currency was completely destroyed and the currency reform of 1948 ushered in the deutschemark, the Grail of which the authorities of the Bundesbank are the guardians.
During the early 1870s, the numerous states of Germany had fragmented currencies which were unified by the creation of the Reichsbank in 1876. From its inception the Reichsbank was completely dependent on the government. But as Germany had joined the gold standard, such dependence was not a matter of great concern. One of the central principles of international monetary economics is that if one fixes the exchange rate, then there is little or no scope for an independent monetary policy...a simple lesson that is forgotten more often than learnt. So, although Germany rarely obeyed the implicit rules of the old gold standard (it was a notorious hoarder of gold), the convertibility requirement prevented any inflationary financing until the abrogation of the standard in 1914. Then, at the behest of governments, the Reichsbank, by monetizing the large government deficits, ensured the hyperinflation of 1920-23.

As a result of the advocacy of Montague Norman, the powerful Governor of the Bank of England, and the pressure exerted by the Allies in May 1922, the Reichsbank was made independent of government by the Autonomy Act. The monetary reform of 1923 and the creation of the new stabilizing Rentenmark--"backed by the real estate of the Reich"--paved the way for the establishment of a new currency, the "Reichsmark," which was based on the gold exchange standard. The Reichsbank remained independent of government.

With the accession of Hitler, however, the Reichsbank was soon put in its place. Through one encroachment after another, the independence of the Reichsbank was repudiated. In 1937 it was made subject to the instructions of the Fuhrer, Hitler. In January 1939 six of its eight directors were dismissed when they criticized the excessive borrowing required to finance Hitler's spending plans. Thus Germany was all set for the great inflation that followed World War II.

It is not surprising that the German people developed a dread of inflation. Just as the hyperinflation of 1920-23 was important in projecting Hitler into power and to the devastation of war-time defeat, it also caused the complete collapse of the currency and of the economy after World War II. Never again. The independence of the central bank from government became the basis for the forerunner of the Bundesbank, the Bank Deutscher Lander, which was set up to implement the currency reforms of 1948. And with the establishment of the Bundesbank in 1957, a high degree of independence was written in the Bundesbankgesetz (charter).

All this is described in considerable accurate detail in David Marsh's book. Alas, he could not resist the temptation to dwell on the Nazi-party membership of some of the distinguished staff and councils of the Bundesbank. Such smear jobs might have been omitted. Yet Marsh is a gifted journalist and his command of events is most impressive. But he does not have the same respect for ideas as he does for the nitty-gritty of reportage.

In my view the change in ideas was of great importance in converting a collectivist Nazi state into the liberal market economy of the Federal Republic. The context of these great changes in Germany was the development of ideas behind the Sozialwissenschaft--the social market economy. A small band of German intellectuals, led by two great liberal (in the European and literal sense) economists, Walter Eucken and Wilhelm Ropke, bravely opposed the increased socialization and central planning of the Hitler economy and developed the ideas of Ordo-Liberalism (notably in Walter Eucken's book Grundsatze der Wirtschaftpolitik, Tubingen, 1952). The primary focus was through Ordnungspolitik, the "constituent principles" of a market economy (monetary stabilization, free entry, private property, and above all maintaining competition). But this Ordo-Liberalism was modified by Alfred Muller-Armark (Erhard's state-secretary) and other scholars who felt that, as a subsidiary matter, state intervention was needed in order to ensure a safety-net. They wanted to avoid the alienation of dispossessed and disaffected groups that had provided such a fertilizer for the poseurs and demagogues of fascism and communism. This modified Ordo-liberalism was called the "social market economy." Eucken, above all, emphasized the need for price signals, undistorted by inflation, for the market to work efficiently and thus the requirement of a stable general price level. It seems that Eucken, rather like Milton Friedman in our day, would have preferred to bind the central bank to strict monetary rules. But the preponderant opinion was in favor of the conduct of monetary policy by an independent central bank.

Read more: notmsnmoney.proboards.com/index.cgi?action=display&board=moneytalk&thread=459&page=3#ixzz1Ag7yiNmW

The reason Germany has so many savers vs investors in the USA is the fight has been all about inflation.. Two time the Middle class has been destroyed by Inflation!!! Axel Weber must be mad as hell about the 2+ inflation rate of the EURO..Just a thought, Bi Metal Au Pt

[itstippy]

"...boomers carry far more debt than other generations. Because of inadequate saving, two-thirds of baby boomers are unprepared for retirement, defined by McKinsey as able to sustain 80% of their spending as they age.The solution, they say, is to work longer. If the median age of retirement were to rise two years, from 62.6 today to 64.1 in 2015, the number of “unprepared” households would be cut in half."

No one forces people to retire at age 62. If they reach age 62 they qualify for a reduced SS pension; but if they have insufficient personal assets then they are unprepared and cannot retire. They should have saved more when they were younger; they didn't, so now they can't take advantage of early retirement at age 62. Many will simply have to continue working to pay for the houses, cars, boats, motorcycles, vacations, etc. they bought in their 40's. Judging from the level of personal debt out there, some will have to work well into their 90's.

The median age of retirement in the US will climb from 62.6 to 64.1 without any changes to SS benefits' target dates. It will happen by 2015. Boomers haven't saved enough. They are unprepared for retirement. They will continue working.

[bimetalaupt]

ITS TIPPY,
Well if someone is borrowing money then someone has to be saving it??? Well banks do create money by lending so this is why we had more money in the past for retirement.... We invested in local banks and mutual Insurance firms. I did a post on the old Board about the Praetorian.. They had a paid up 65 insurance and a one payment insurance that paid instalment at age 65 or 70 etc... They gave you a better paid out the SS because the investment earned interest.

It used to be the thing to borrow all the money you could and invest.. as long as you can and cheap as you can.. It is all about investing and return.. Most funds did not do well over the last 10 years. Bonds did better then stock!!! How many times have you seen my post on bonds getting blasted over the last five years??? It is all about the Sharpe index and risk vs return.

Just a thought,
Bruce

[Aman A.K.A. Ahamburger]

It is all about the Sharpe index and risk vs return.

The FED has done a good job with their so far, eh B??

They had a paid up 65 insurance and a one payment insurance that paid installment at age 65 or 70 etc... They gave you a better paid out the SS because the investment earned interest.

My Father in law sold insurance for 25yrs. Forced retirement(10 yrs ago) because of a critical brain disease.. Their house is paid for, they just paid for a new caddie, enjoy a nice lifestyle. He just turned 60. Without his critical illness they would have be screwed. Plans bought when kids are really young will leave their kids LOTS! My wifes plan(life) is 20+ yrs old already. My three sons will have something when we are gone!!

New York life hasn't missed a payment in 158 yrs!