http://calnewport.com/blog/2010/01/06/the-grandmaster-in-the-corner-office-what-the-study-of-chess-experts-teaches-us-about-building-a-remarkable-life/ The Grandmaster in the Corner Office: What the Study of Chess Experts Teaches Us about Building a Remarkable LifeJanuary 6th, 2010 · 200 comments Becoming a Grandmaster How do great chess players become great? If you read Malcom Gladwell’s Outliers , you probably have an answer: the 10,000 hour rule. This concept, which was first introduced in academic circles in the early 1970s, was popularized by Gladwell in his 2008 book. Here’s how he summarized it in a recent interview: When we look at any kind of cognitively complex field — for example, playing chess, writing fiction or being a neurosurgeon — we find that you are unlikely to master it unless you have practiced for 10,000 hours . That’s 20 hours a week for 10 years. There seems to be no escape from this work. As Flordia State University Psychology Professor Anders Ericsson reminds us: “even the chess prodigy Bobby Fisher needed a preparation period of nine years.” The full story, however, is more complex. Gladwell is right when he notes that the 10,000 hour rule keeps appearing as a necessary condition for exceptional performance in many fields. But it’s not sufficient . As Ericsson, along with his colleague Andreas Lehmann, noted in an exceptional overview of this topic, “the mere number of years of experience with relevant activities in a domain is typically only weakly related to performance.” Put another way, you need to put in a lot of hours to become exceptional, but raw hours alone doesn’t cut it. To understand what else is necessary, I’ll turn your attention to a fascinating 2005 study on chess players , published in the journal Applied Cognitive Psychology . After interviewing two large samples of chess players of varied skill, the paper’s authors found that “ serious study ” — the arduous task of reviewing past games of better players, trying to predict each move in advance — was the strongest predictor of chess skill. In more detail: …chess players at the highest skill level (i.e. grandmasters) expended about 5000 hours on serious study alone during their first decade of serious chess play —nearly five times the average amount reported by intermediate-level players. Similar findings have been replicated in a variety of fields. To become exceptional you have to put in a lot of hours, but of equal importance, these hours have to be dedicated to the right type of work. A decade of serious chess playing will earn you an intermediate tournament ranking. But a decade of serious study of chess games can make you a grandmaster. I’m summarizing this research here because I want to make a provocative claim: understanding this “right type of work” is perhaps the most important (and most under-appreciated) step toward building a remarkable life … Deliberate Practice Anders Ericsson, the psychology professor quoted above, coined the term deliberate practice (DP) to describe this special type of work. In a nice overview he posted on his web site, he summarizes DP as: ctivities designed, typically by a teacher, for the sole purpose of effectively improving specific aspects of an individual’s performance. Geoff Colvin, an editor at Fortune Magazine who wrote an entire book about this idea, surveyed the research literature, and expanded the DP definition to include the following six traits (which I’ve condensed slightly from his original eight): It’s designed to improve performance. “The essence of deliberate practice is continually stretching an individual just beyond his or her current abilities. That may sound obvious, but most of us don’t do it in the activities we think of as practice.” It’s repeated a lot. “High repetition is the most important difference between deliberate practice of a task and performing the task for real, when it counts.” Feedback on results is continuously available. “You may think that your rehearsal of a job interview was flawless, but your opinion isn’t what counts.” It’s highly demanding mentally. “Deliberate practice is above all an effort of focus and concentration. That is what makes it ‘deliberate,’ as distinct from the mindless playing of scales or hitting of tennis balls that most people engage in.” It’s hard. “Doing things we know how to do well is enjoyable, and that’s exactly the opposite of what deliberate practice demands.” It requires (good) goals. “The best performers set goals that are not about the outcome but rather about the process of reaching the outcome.” If you’re in a field that has clear rules and objective measures of success — like playing chess, golf, or the violin — you can’t escape thousands of hours of DP if you want to be a star. But what if you’re in a field without these clear structures, such as knowledge work, writing, or growing a student club? It’s here that things start to get interesting… Deliberate Practice for the Rest of Us Colvin, being a business reporter, points out that this sophisticated understanding of performance is lacking in the workplace. “At most companies,” he argues, “the fundamentals of fostering great performance are mainly unrecognized or ignored.” He then adds the obvious corollary: “ Of course that means the opportunities for achieving advantage by adopting the principles of great performance are huge. ” It’s this advantage that intrigues me. To become a grandmaster requires 5000 hours of DP. But to become a highly sought-after CRM database whiz, or to run a money-making blog, or to grow a campus organization into national recognition, would probably require much, much less. Why? Because when it comes to DP in these latter field, your competition is sorely lacking. Unless you’re a professional athlete or musician, your peers are likely spending zero hours on DP. Instead, they’re putting in their time, trying to accomplish the tasks handed to them in a competent and efficient fashion. Perhaps if they’re ambitious, they’ll try to come in earlier and leave later in a bid to outwork their peers. But as with the intermediate-level chess players, this elbow-grease method can only get you so far. As Ericsson describes it , most active professionals will get better with experience until they reach an “acceptable level,” but beyond this point continued “experience in is a poor predictor of attained performance.” It seems, then, that if you integrate any amount of DP into your regular schedule, you’ll be able to punch through the acceptable-level plateau holding back your peers . And breaking through this plateau is exactly what is required to train an ability that’s both rare and valuable (which, as I’ve argued, is the key to building a remarkable life ). This motivates a crucial question: What does DP look like for fields that don’t have a tradition of performance-optimization, such as knowledge work, freelance writing, entrepreneurship, or, of course, college? Let me use myself, in my role as a theoretical computer scientist , as an example. There are certain mathematical techniques that are increasingly seen as useful for the types of proofs I typically work on. What if I put aside one hour a day to systematically stretch my ability with these techniques? Taking a page out of the chess world, I might identify a series of relevant papers of increasing complexity, and try to replicate the steps of their key theorem proofs without reading them in advance. When stuck, I might peek ahead for just enough hints to keep making progress (e.g., reading an induction hypothesis , but not the details of their inductive step ). The DP research tells me that this approach would likely generate large gains in my expertise. After a year of such deliberate study, I might even evolve into one of the experts on the topic in my community — a position that could yield tremendous benefits. Why am I not doing this? What would such strategies look like in other aspects of my life, like non-fiction writing or blogging? What about for other similar fields? These are the type of questions I want to explore this winter here on Study Hacks. The answers aren’t obvious. But that’s what makes this endeavor exciting. By piecing together a systematic approach to building a DP strategy for unconventional fields, I hope to identify an efficient path to the type of excellence that can be cashed in for remarkable rewards. Or, perhaps I’ll discover that such a quest is quixotic. Either way, it should be fun… (Photo by World Economic Forum ) 200 thoughts on “The Grandmaste
What Happened The Last Time The Unemployment Rate Dropped This Much Submitted by Tyler Durden on 02/08/2014 16:08 -0500 BLS Bureau of Labor Statistics Congressional Budget Office Demographics Federal Reserve New Normal None Obamacare Real Unemployment Rate Recession recovery Unemployment in Share 4 One of the biggest accomplishments of the president, in his own words, is managing to push the official (U-3) unemployment rate, from its post-Lehman high of 10% hit in October 2009 to only 6.6% as of January 2014 as Friday's jobs report revealed. This rapid drop in unemployment - call it the "Obama Recovery" - caught none other than the Fed completely unaware, whose 6.5% unemployment rate tightening threshold is now in tatters, as it the credibility of the Fed's forward guidance as the Fed will have no choice but to scrap all unemployment QE ending, rate hiking "thresholds" at its next FOMC meeting. So what happened to the unemployment rate that it dropped so fast it surprised and embarrassed even the "venerable" Federal Reserve, which had initially expected a 6.5% unemployment rate some time in 2015. To get the answer we go back in time to the last (and only previous) time when the US unemployment rate dropped from roughly 10%, which was in June 1983, to 6.6%, which took place three and half years later, in December 1986 - let's call it the "Reagan Recovery" in short. Here is how the old normal compares to the "New Normal." US unemployment dropped from 10.1% to 6.6% between June 1983 and December 1986: an interval of 43 months. US unemployment dropped from 10.0% to 6.6% between October 2009 and January 2014: an interval of 52 months. So far so good: one can expect the "Obama Recovery" from the Great Financial Crisis to take a little bit longer than "Reagan's." But what about the internals. This is where things start getting weird. First, we look at the number of actual jobs added (according to the Establishment survey) from the 10% point at the peak to the 6.6% at the bottom. What we find is that despite the US workforce being over 30% larger today than it was 28 years ago, it took far less actual jobs created to drop the unemployment rate by 3.4%. Specifically, while the "Reagan Recovery" resulted in the creation of 10.5 million jobs, the "Obama Recovery" achieved the same low unemployment rate with only 7.5 million jobs added. The difference between the Old and New Normal is even more acute when one looks at the change in average monthly job gains over the "recovery" period: as noted, in 1986 the duration of the rate drop period was 43 months, where currently it has taken 52 months. This means that the Obama recovery has resulted in just 145K job additions on average per month while the unemployment rate has dipped from 10.0% to 6.6%, compared to the far more impressive 244K - and indicative of a real recovery - that marked the 1983-1986 period. However, nowhere is the distinction more acute when comparing the two "recoveries", then when one looks at the underlying population and labor force trends. First, here is what a normal recovery looks like: during the Reagan Years, the Civilian, Non-institutional population - or the total number of Americans eligible for work whether they are part of the labor force or not - increased by 7.4 million, while the labor force increased by 6.7 million - as close to a linear relationship as possible, and also a correlation which any rational person would expect. So how about the Obama recovery: well, we find that between October 2009 and January 2014, the civilian, non-institutional population rose by 10.4 million, to be expected considering the far greater general population of the US - it is also a number which, on average, increases by about 230K or so every month. So what about the labor force? It is here that things get zany (as we predicted they would many years ago), because it is here that the Obama Recovery has somehow only managed to add a paltry 1.7 million people to the workforce: from 153.8 million to 155.5 million ! Of course, the above unleashes the avalanche of "demographic" excuses which we have all grown to know and laugh at, because when economists can't explain something, they promptly fall back to patently false "justifications" - recall that as we explained the collapse in the labor force has very little to do with demographics, something which the BLS itself thought as recently as 2004 when it projected a rising labor force participation into the coming years only to readjust it lower in the coming years. The real reason for this ongoing collapse in the labor force, is the same that the CBO used to explain why - in politically correct terms - Obamacare will adversely impact the labor force over the next decade: Americans will have to earn less to get full coverage, or said otherwise, they are less incentivized to work more . This is precisely the US welfare state at work, and when one extends the Obamacare "rationale" one sees that the administration's core goal is to make increasingly more people reliant on handouts than on labor, as we explained in " When Work Is Punished: The Tragedy Of America's Welfare State " in which we showed why "for increasingly more in America, it is more lucrative to sit, do nothing, and collect various welfare entitlements, than to work" as can be seen in the "welfare cliff" charts below ( source ). Alas, that is the real reason why the labor force collapse continues and will continue even as America enters its next recession. Or depression. So what happens when one renormalizes the unemployment rate calculation and uses a 30 year average labor force participation rate as a constant instead of a variable to be plugged by the BLS to goalseek a desired result? This happens: What the chart above shows is that the "real" unemployment rate in October 2009 was 11.2%. Where is it now? 11.1% . And there is your "Obama Recovery", when stripped of all the fancy veneer and TOTUSed propaganda, right there. Average: 4.95652 Your rating: None Average: 5 ( 46 votes)
Why The Next Global Crisis Will Be Unlike Any In The Last 200 Years Submitted by Tyler Durden on 02/06/2014 16:35 -0500 Congressional Budget Office Deficit Spending France Germany Great Depression Gross Domestic Product Netherlands Stagflation in Share 1 Submitted by F.F. Wiley of Cyniconomics blog , Sometime soon, we’ll take a shot at summing up our long-term economic future with just a handful of charts and research results. In the meantime, we’ve created a new chart that may be the most important piece. There are two ideas behind it: Wars and political systems are the two most basic determinants of an economy’s long-term path. America’s unique pattern of economic performance differs from Russia’s, which differs from Germany’s, and so on, largely because of the outcomes of two types of battles: military and political. The next attribute that most obviously separates winning from losing economies is fiscal responsibility. Governments of winning economies normally meet their debt obligations; losing economies are synonymous with fiscal crises and sovereign defaults. You can argue causation in either direction, but we’re not playing that game here. We’re simply noting that a lack of fiscal responsibility is a sure sign of economic distress (think banana republic). Our latest chart isolates the fiscal piece by removing war effects and considering only large, developed countries. In particular, we look at government budget balances without military spending components. (Military spending requires a different evaluation because it succeeds or fails based on whether wars are won or lost. Or, in the case of America’s adventures of the past six decades, whether war mongering policies serve any national interest at all. In any case, military spending isn’t our focus here.) There are 11 countries in our analysis, chosen according to a rule we’ve used in the past – GDP must be as large as that of the Netherlands. We start in 1816 for four of the 11 (the U.S., U.K., France and Netherlands). Others are added at later dates, depending mostly on data availability. (See this “technical notes” post for further detail.) Here’s the chart: Not only has the global, non-defense budget balance dropped to never-before-seen levels, but it’s falling along a trend line that shows no sign of flattening. The trend line spells fiscal disaster. It suggests that we’ve never been in a predicament comparable to today. Essentially, the world’s developed countries are following the same path that’s failed, time and again, in chronically insolvent nations of the developing world. Look at it this way: the chart shows that we’ve turned the economic development process inside out. Ideally, advanced economies would stick to the disciplined financial practices that helped make them strong between the early-19 th and mid-20 th centuries, while emerging economies would “catch up” by building similar track records. Instead, advanced economies are catching down and threatening to throw the entire world into the kind of recurring crisis mode to which you’re accustomed if you live in, say, Buenos Aires. How did things get so bad? Here are eight developments that help to explain the post-World War 2 trend: In much of the world, the Great Depression triggered a gradual expansion in the role of the state. Public officials failed to establish a sustainable structure for their social safety nets, and got away with this partly by sweeping the true costs of their programs under the carpet . Profligate politicians were abetted by the economics profession, which was more than happy to serve up unrealistic theories that account for neither unintended consequences nor long-term costs of deficit spending. With economists having succeeded in knocking loose the old-time moorings to budgetary discipline (see first 150 years of chart), responsible politicians became virtually unelectable. Central bankers suppressed normal (and healthy) market mechanisms for forcing responsibility, by slashing interest rates and buying up government debt. Regulators took markets further out of the equation by rewarding private banks for lending to governments, while politicians and central bankers effectively underwrote the private bankers’ risks. Monetary policies also encouraged dangerous private credit growth and other financial excesses, resulting in budget-destroying setbacks such as stagflation and banking crises. Budget decisions were made without consideration of the inevitability of these setbacks, because economists wielding huge influence over the budgeting process (think CBO , for example) assumed a nave utopia of endless economic expansion . Sadly, all of these developments are still very much intact (excepting small improvements in budget projections that we’ll address next week). They tell us we’ll need substantial changes in political processes, central banking and the economics profession to avert the disaster predicted by our chart. And we’re rapidly running out of time, as discussed in “ Fonzi or Ponzi? One Theory on the Limits to Government Debt .” On the bright side, a fiscal disaster should help trigger the needed changes. Every kick of the can lends more weight to the view expressed by some that the debt super-cycle – including public and private debt – needs to go the distance, eventually reaching a Keynesian end game of massive collapse. At that time, we would expect a return to old-fashioned, conservative attitudes toward debt. As for the chart, it helps to flesh out a handful of ideas we’ve been either writing about or thinking of writing about. We’ll return to it in future posts, including one drilling down to the individual country level that we’ll publish soon. Average: 4.666665 Your rating: None Average: 4.7 ( 18 votes)
CBO - The Coming Raid on Social Security Submitted by Bruce Krasting on 02/10/2013 11:30 -0500 Congressional Budget Office Gambling Every politician in America knows that Social Security (SS) is a third rail. Any Pol who tries to mess with the country's largest and most popular entitlement program is going to have the likes of the AARP coming after them. It's not possible to win an election on a platform that advocates cutting back SS. With that in mind, I find it interesting to report that a very credible source is now predicting that Obama AND Congress will take action over the next 24 months that will substantially undermine both the long and short-term health of SS. The legislative raid on SS will certainly total in the hundreds of billions, it could top $1T over the next fifteen years. So who is this "credible source"? And just how is this raid going to happen? The source of this information is the Congressional Budget Office (CBO); the following is how it will play out: SS consists of two different pieces. The Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). Both entities have their own Trust Funds (TF). OASI has a big TF that will, in theory, allow for SS retirement benefits to be paid for another 15+ years. On the other hand, the DI fund will run completely dry during the 1stQ of 2016. By current law, the DI benefits must be cut across-the-board by 30% on the day that the DI TF is exhausted. This would mean that 11 million people (most of whom are very sick) would get slammed from one day to the next. There is no one in D.C. who wants this to happen. I don't think the American public wants this outcome either. So what are the fixes? 1) Increase income taxes on +$250k of income to pay for the DI shortfall. Maybe, but this will not happen with the current Republican controlled House. 2) Increase Payroll taxes to cover the DI shortfall. I see zero political support for a permanent Payroll tax increase. 3) Cut benefits by 30%. This would be insane - it will not happen with Obama running the show. 4) Kick the can down the road and raid the OASI TF for the annual shortfalls at DI. Of course #4 is the path that will be taken. #s 1, 2 and 3 are not politically feasible. I have been wondering what will happen with the DI conundrum. I was surprised to see that the CBO spelled out what will happen in its report on the Budget and Economy - SS Trust Funds . The report has this footnote: CBO projects that the DI trust fund will be exhausted during fiscal year 2016. Under current law, the Commissioner of Social Security may not pay benefits in excess of the available balances in a trust fund, borrow money for a trust fund, or transfer money from one trust fund to another. However, following rules in the Deficit Control Act of 1985 (section 257(b)), CBO's baseline assumes that the Commissioner will pay DI benefits in full even after the trust fund is exhausted. The "loophole" to drain the OASI insurance is already law - so Congress doesn't have to do anything to raid the retirement fund. The "do nothing" plan is always the best option in D.C. The footnote goes on to provide an estimate for the size of the raid: For illustrative purposes , below are the cumulative shortfalls in the DI trust fund beginning in 2016. Those shortfalls do not include interest expenses. DI Trust Fund Cumulative Shortfall ($s in Billions) 2016 -15 2017 -55 2018 -94 2019 -133 2020 -173 2021 -215 2022 -260 2023 -307 Wow! At this rate the raid tops $1T in 2029. This is is a big dent in a Trust Fund of $2.8T. There is an import "tell" from the CBO. In the footnotes it highlights the fact that there is a discrepancy, and uses this an excuse to avoid establishing an adjusted end date for the OASI Trust Fund. (It's not a complicated calculation) What CBO fails to state is that the raid on OASI will result in a significant reduction in the End Date for the retirement Fund. In its report to Congress last year SS forecast that the Retirement fund would be exhausted in 2033. The DI drain (and other negative revisions by CBO) will bring the End Date to below 2030 in the upcoming SS report to Congress. That would be a very significant development. CBO does not want to be the one who puts a new date "out there". To me, this was a cop-out by the CBO. Given that discrepancy between the trust funds' operation and the baseline's assumption, CBO is not providing DI or combined trust fund totals for the year of exhaustion and thereafter. The timing of this story is interesting. The question in my mind is will the "fix" come before or after the bi-election. If Obama was a gambler, and he believed the Democrats could re-take the House in 2014, then he might defer action on DI until 2015. This scenario creates the opportunity for option #1, a tax on the rich to supplement DI. Of course that is gambling, and there would be a very small window of time to push through a new income tax to save DI. Then there is the Republicans. Do they want to push this before, or after 11/2014? I could argue both ways, but in the end, it gets back to the fact that no one wants to "do" anything with SS. It's better to do "nothing"; that makes #4 the most likely outcome. I hope that some of the big Defenders of SS pick up on the information from the CBO regarding the coming raid on the retirement fund. This is a huge constituency (60m beneficiaries - 150m contributors - every politician in the country - all of the Press). If that group catches on to what is about to happen to the retirement fund, there will be a great chorus of, "Don't you dare touch my money!" I'm trying to stir the pot on this one. I want DI's terminal condition to come onto the table sooner versus later. I'm hoping that if and when it does come up for discussion, it opens the door on the broader issue of what the hell America is doing with entitlements. Basically, I'm trying to pick a big fight. For the good of the country, wish me luck.
Charting US Debt And Deficit Since Inception Submitted by Tyler Durden on 12/17/2012 23:00 -0500 Alan Greenspan Budget Deficit Central Banks Congressional Budget Office Federal Reserve Gross Domestic Product Japan Layering Lehman Lehman Brothers Monetization Mutual Assured Destruction Shadow Banking Sovereign Debt In the recent aftermath of the US just concluding its fourth consecutive fiscal year with a $1 trillion+ deficit, we have been flooded with requests to show how the current fiscal situation stacks up in a big picture context. Very big picture context . For all those requests, we present the following chart showing total US Federal debt/GDP as well as Deficit/(Surplus)/GDP since inception, or in this case as close as feasible, or 1792, which appears to be the first recorded year of historical fiscal data. We can see why readers have been so eager to see the " real big picture " - the chart is nothing short of stunning. Some observations: Beginning with the Anglo-American war of 1812, and continuing through the US civil war, World War I and World War II, the major military shocks to the US fiscal system are clearly obvious. Just as obvious is the impact of not only The Great Moderation which started in the early 1980s just before the 1987 arrival of Alan Greenspan at the helm of the Fed, which allowed the US to exchange fiscal prudence for ever cheaper debt which could and would be used to fund an ever greater budget deficit, and lead to a surge in the Federal debt. The increasingly more unstable system, which saw the additional layering of another $23 trillion in shadow banking debt at its peak in 2008, as well as countless trillions in household, corporate and financial debt, as well as hundreds of trillions in underfunded welfare liabilities, led first to the Internet bubble, then the Housing and Credit bubble, and finally, to the Great Financial Crisis of 2008 which climaxed with the failure of Lehman brothers, and resulted in the central bank bailout of every developed bank, and shortly thereafter, the backstop of every peripheral country in Europe. The gravity and impact of the Great Financial Crisis on the US economy is stark, very visible, and can only be compared to previous instances of destructive military conflict in terms of lost output and impact on the US economy. Total US Debt/GDP is currently just over 103%. This number is expected to rise to 125% by the end of 2016, which will eclipse the peak debt/GDP seen in World War II, and be the highest in US history. Whereas in the past episodes of fiscal catastrophe were accompanied not only by a surge in debt (black line), but by a parallel explosion in fiscal deficits (red bars), this time the deficit spike has been more modest (peaking at about 10% of GDP), but more protracted, with even the CBO expecting deficits of around $1 trillion to last for the next several years. One possible interpretation is that due to the Fed's relentless interest rates intervention, the polarized US government feels no burning desire to promptly balance its budget, and even overshoot, and through a combination of aggressive spending cuts and/or revenue increases, result in a much needed surplus which would be used to reduce the sovereign debt. This is graphically seen in the ongoing Fiscal Cliff debate, when any proposal for substantial spending cuts - the true problem at the core of America's deficit habituation and welfare statism - is greeted with shrieks of Mutual Assured Destruction. This is not a political issue: politicians on both sides of the aisle are perfectly aware that setting the US on a sustainable fiscal course would mean massive pain for the common citizen, and an immediate termination of all existing political careers: after all the myth of the welfare state is at stake. It is in everyone's interest - both GOP and Democrat - to perpetuate the unsustainable deficit status quo indefinitely. Any theatrics out of the GOP demanding fiscal conservatism are therefore just that - theatrics. There is no question that it is unsustainable: US GDP is currently growing at a pace of 1.5%-2.5% at best. Total 2012 US debt will have risen at a rate of 8%, and will continue rising in the 6%-8% range. More disturbing is the influence of the Fed, whose policy of ZIRP and outright debt monetization (recall even JPM has now admitted the Fed will monetize all US debt issuance in 2013) is the only permissive factor that has allowed the US to delay the inevitable moment of reckoning as long it has. Indicatively, a modest rise in the average US interest rate, which is currently at all time blended lows, to just 5%, would mean that in 3 years the US would spend, pro forma, $1 trillion in cash interest each year . At that point the US will approach Japan status, where the government needs to borrow just to fund interest outlays. Actually, instead of Japan, Weimar would be a better analogy. Finally, on all previous historical occasions, there was at least one backstop of last reserve, a central bank, standing ready to step in and provide the necessary liquidity, and monetize the needed debt to keep the show running. Since 2009, all the central banks have also gone all in on the Keynesian endgame: at this point the next shock to the status quo system will be the last, as there is no more backstops. At that point the only two options will be outright monetary devaluation, though not relative in the closed monetary loop of modern monetarism, but absolute , where every currency is concurrently devalued against a hard asset (potentially with the forceful concurrent confiscation of said hard asset by the host government, think Executive Order 6102), in order to generate a terminal currency and debt debasement, or outright global debt moratoria, and the end of the modern financial system as we know it (but not before the financial "leaders" of our time have converted enough of their paper wealth into hard asset format and transferred it to more peaceful, more "gun-controlled", non-extradition territories). And there you have it. Oh, and whoever said the advent of the Federal Reserve, or the end of "hard money" standard courtesy of Richard Nixon, made catastrophic or systematically shocking events less frequent, probably should have their head examined. Average: 5 Your rating: None Average: 5 ( 13 votes) Tweet Login or register to post comments 5750 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: IMF Says Japan And Spain Are Done, "Debt Ratio Will Never Stabilize" A Mushroom Cloudy Future: In 2016 Japan, Net Debt Per Capita Will Be $140,000 As US Closes June With $15,856,367,214,324.44 In Federal Debt, US Debt/GDP Hits Post WWII High Of 101.5% UBS Issues Hyperinflation Warning For US And UK, Calls It Purely "A Fiscal Phenomenon" Deja 2011 Vu Part 2: Goldman Sees Another US Downgrade In 2013
America's Demographic Cliff: The Real Issue In The Coming, And All Future Presidential Elections Submitted by Tyler Durden on 08/18/2012 15:30 -0400 BLS Bureau of Labor Statistics Census Bureau Congressional Budget Office default Department of Justice FBI Gallup Germany Gross Domestic Product Japan Medicare None Obamacare Unemployment In four months the debate over America's Fiscal cliff will come to a crescendo, and if Goldman is correct (and in this case it likely is), it will probably be resolved in some sort of compromise, but not before the market swoons in a replica of the August 2011 pre- and post-debt ceiling fiasco: after all politicians only act when they (and their more influential, read richer, voters and lobbyists) see one or two 0's in their 401(k)s get chopped off. But while the Fiscal cliff is unlikely to be a key point of contention far past December, another cliff is only starting to be appreciated, let alone priced in: America's Demographic cliff , which in a decade or two will put Japan's ongoing demographic crunch to shame, and with barely 2 US workers for every retired person in 2035 , we can see why both presidential candidates are doing their darnedest to skirt around the key issue that is at stake not only now, be every day hence. Sadly, the market which due to central-planner meddling, has long lost its discounting capabilities, and is now merely a re active mechanism, will ignore this biggest threat to the US financial system until it is far too late. After all it is the unsustainability of America's $100+ trillion in underfunded welfare liabilities that is the biggest danger to preserving the American way of life, and will be the sticking point in the presidential election in 80 days. However, don't expect either candidate to have a resolution to the demographic catastrophe into which America is headed for one simple reason. There is none. The problem in a nutshell: the first wave of Baby Boomers, born between the years of 1946 and 1964, officially reached retirement age in 2011. There are a whole lot of Baby Boomers - just under 76 million, to be exact - that will depend on new money flowing into the system to help keep the entitlements coming. According to the latest Social Security and Medicare Board of Trustees 2012 Annual Reports Social Security now pays out more than it takes in, and is expected to do so for the next 75 years. And while the market, and its "discounting" may now be largely irrelevant, those who care to be educated about the facts behind America's Demographic Cliff, here is ConvergEx and " Talkin' 'bout your generation " According to the Census Bureau’s Current Population Survey, about 40.2 million people – 13% of the entire US population – are 65 years or older and eligible to receive government entitlements such as Medicare and Social Security. At current levels, spending on these entitlements make up about 8.7% of GDP – about $1.3 trillion. While this may sound sustainable over the short term, in coming years the amount of entitlement outlays necessary to keep up with retiring Baby Boomers is going to send spending through the roof. By 2030, for example, a full 19.3% of the population will be claiming SSI and Medicare benefits, based on the Census Bureau’s population projections (the CB uses an adjustment factor for the age cohorts based on mortality rates, foreign-born immigration, and life expectancy). For simplicity’s sake, here’s a decade-by-decade look at where the aging population – and expenditures – will be in the years to come, courtesy of the Census Bureau and the Congressional Budget Office (CBO): In 1900, 4.1% of the US population was 65+. By 1950, this number had almost doubled to 8.1%. As the chart following the text shows , the Baby Boomers (now ages 48-66) represent the most significant population wave in US history. According to the CBO, the population aged 65 and over will increase by 87% over the next 25 years as Baby Boomers enter retirement, compared to an increase of only 12% in those aged 20-64. This year, 13% of the US population is 65+ and entitlement spending accounts for 8.7% of GDP . And that number only includes SSI and Medicare, not Medicaid and future Obamacare subsidies which add to these outlays. In 10 years (2022): 16.1% of the population will be 65+, entitlement spending estimated at 9.6% ($1.5 trillion, based on 2011 US GDP) 2037 (25 years on): 20 % of the US population will be 65+, entitlement spending estimated at 12.2% of GDP ($2.0 trillion) Not surprisingly, there will be far more women than men in the 65+ population . Women currently live about five years longer than their male peers, on average. Accordingly, the Census Bureau estimates that in 2030, there will be about 8 million more women than men that are 65 and older by 2030: 27.8 million versus 35.7 million. It’s a pretty tough picture, to say the least; as the population ages, we’re looking at more and more money dedicated to retirement benefits with a smaller workforce to fund the spending. We’re not the only ones, either: Japan is in worse shape than the US, with 23.1% of the population already over 65. In 2050, government statistics forecast that number to be 39.6%. Europe’s in the same boat: 17.4% of the population in EU countries was 65+ in 2010, and it’s expected to be about 30% by 2060. The developed world, essentially, is facing a demographic “Fiscal cliff” with no clear-cut strategies for how to fund the liabilities inherent in an entirely predictably aging population . Are there any social positives that might mitigate this plethora of indisputable financial concerns ? The math is the math, as quants are fond of saying, so I don’t expect that there are overwhelming offsets to the problem of an aging population. But there are some notable “Positives” which don’t get the attention they deserve because they offer such a lightweight counterbalance to the challenges I outlined above. Still, here are a few thoughts: Stronger voter turnout/greater engagement in the political process . The 65+ age group has beaten out every other age cohort in voter turnout in every Presidential and Congressional election since 1980. In the latest presidential election, 68.1% of those aged 65+ went to the polls, versus and average of 51.2% for the rest of the voting-age population. The reason for this differential is straightforward: it easier for retired persons to vote given fewer time restrictions, allowing the higher turnout rate. But given an average turnout of 58.2% overall in 2008 for Obama’s election, compared to an average of 70-80% in other developed countries (Japan, Germany, Canada, Spain), the growing 65+ population will certainly help the U.S. come closer to its developed country peers on this metric. The stronger turnout of these voters, and their sheer numbers, are also likely to have an important impact on US political races in the years to come . They’re going to be the biggest voting bloc in American history, if patterns hold: 68% of them is almost 52 million, larger than the entire Black/African American voter population, for example. And like other older generations, according to a study by the Pew Research Center done in late 2011, Boomers have become slightly more conservative as they’ve aged, and slightly more of them (45% vs. 51%) intend to vote for Governor Romney in the upcoming election. However, given that one of their main concerns is the maintenance of entitlement spending, it seems unlikely that Boomers will continue to support a party that recommends reducing the deficit by cutting entitlements. All candidates, then, and especially the GOP, will need to take a hard look at the wants and needs of the Boomers. The 2012 Presidential election – and many others afterwards - will quite literally depend on their votes. Lower crime rates . The younger population is by far the more crime-prone age cohort, according to the Department of Justice and the FBI Uniform Crime report. The DOJ publishes an annual report on arrests by age, the first occurring in 1980 and the latest in 2009. Over these years, the number of total arrests has increased by 30.9% for the entire population; for the 65+ population, it’s gone up 0.3%. Moreover, the Baby Boomer generation (in 2009, ages 45-53) accounted for only about 7% of all crimes. What were their most “Popular” crimes? Drunkeness and DUI. Violent crimes are almost exclusively the MO of the 18-29 cohort, who account for almost half (44%) of all arrests. It’s not too far of a stretch, then, to think that as our population ages, we can expect less and less violent crime across the country – though you may want to be careful on the roads. Lower resource consumption. The older population tends to cut down on resource consumption after retirement, particularly in the case of gasoline. Once they no longer need to commute to work and move into smaller, more affordable houses, the amount of fuel needed for transportation and heating/cooling should drop, perhaps significantly. Take motor gasoline usage as a benchmark . Just under 60 million Baby Boomers consider themselves a part of the labor force, according to BLS data. 85% of all Americans drive to work, according to a late 2010 Gallup poll, with an average commute of 30 miles round-trip – about 45 minutes – and an average of 20mpg (courtesy of the Bureau of Transportation Statistics). Using these estimates, we can calculate that the average Baby Boomer commuter uses about 33 gallons of gas each month; assuming that 85% of them drive every day, that’s about 1.7 billion gallons of gas being used per month. As they retire, there are actually fewer new entrants into the workforce to replace them, meaning fewer drivers and less fuel consumption. Growing domestic service economy . An older population becomes more and more dependent on services as they age, particularly in the realms of healthcare and transportation. More and more people will be needed to fill the void in these service areas as the Boomers retire. Luckily for the US workforce, these are jobs that can’t be outsourced: healthcare especially depends on on-site care and personal service. In fact, as the population has begun to age, the US has already seen some steady growth in service-related positions . The BLS’s Occupational Employment data logs the number of occupations across the US in major industry sectors as well as almost 800 detailed occupations. According to the survey, the US has seen a -3.3% drop in job growth overall. Healthcare and “Personal Care”, however, have grown 13% and 11% each since that year. Occupations such as physician’s assistants, pharmacy technicians, and home health aides are in high demand, and will most likely continue to be so as the population ages and begins to rely more heavily on these services. Declining unemployment and increased labor force participation for this segment of the workforce . One of the most unique aspects of today’s aging population is their continued presence in the workforce. According to the BLS, 23.4% of Americans age 65+ were in the labor force as of June 2012, making up a full 4.5% of the total civilian labor force. They also had a below-average unemployment rate of 6.9%. If this trend continues, we’re likely to see more productivity from the upper end of the age spectrum in years to come as Boomers delay retirement in favor of working. On the flip side, as more of the aging population retires and leaves the workforce, more job opportunities will open up for those who are currently unemployed. The youngest members of the workforce, ages 18-24, will be the biggest beneficiaries of this shift, as they typically seek the same kind of jobs that the older population currently occupies. When these positions are vacated by the older group, then, and refilled by the younger groups, we may see a decline in youth unemployment rates. The older workforce also opens an interesting opportunity for some employers . The younger half of the Baby Boomer generation is tech-savvy, experienced, and definitely needs the money. This set of skills won’t go unnoticed in the labor market. Unfortunately, these societal “benefits” are only a thin silver lining on a very, very dark cloud. Social Security and Medicare spending are projected to grow exponentially as healthcare costs explode and the biggest population wave in the history of the US starts to enter retirement. The Congressional Budget Office expects spending to increase by 150% over the next 25 years, which is hardly sustainable with barely 2 workers for every retired person in 2035... there’s a storm a comin’ Sources here: http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-05-Long-Term_Budget_Outlook.pdf http://www.census.gov/prod/2010pubs/p25-1138.pdf http://www.census.gov/compendia/statab/cats/elections/voting-age_population_and_voter_participation.html http://www.eia.gov/dnav/pet/pet_cons_wpsup_k_w.htm http://www.bls.gov/emp/ep_table_304.htm http://www.bts.gov/publications/national_transportation_statistics/html/table_04_23.html http://www.openleft.com/diary/13242/the-future-of-the-electorate-age-and-party-id http://www.people-press.org/files/legacy-pdf/11-3-11%20Generations%20Release.pdf http://www.bjs.gov/index.cfm?ty=datoolsurl=/arrests/index.cfm# Average: 4.77778 Your rating: None Average: 4.8 ( 9 votes) Tweet Login or register to post comments 7833 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: The Ever-Increasing Age Of Retirement Japan's Demographic Death Rattle In 3 Charts And 333 Words The twin lost decades in housing and stocks What The US Government Spends Its Money On Inside America's Economic Machine - An Infographic
Friday Humor: "I Am Pledging To Cut The Deficit We Inherited By Half By The End Of My First Term In Office" Submitted by Tyler Durden on 08/03/2012 17:48 -0400 President Obama President Obama, February 2009 " We can not and will not sustain deficits like these without end . Contrary to the prevailing wisdom in Washington these past few years, we can not simply spend as we please and defer the consequences to the next budget, the next administration or the next generation. We are paying the price for these deficits right now. In 2008 alone we paid $250 billion in interest on our debt, that is more than three times what we spent on education that year, more than seven times what we spent on VA healthcare . So if we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road as our interest payments rise, our obligations come due, confidence in our economy erodes and our children and grandchildren are unable to pursue their dreams because they are saddled with our debts. That's why today I am pledging to cut the deficit we inherited by half by the end of my first term in office . This will not be easy - it will require us to make difficult decisions and face challenges we have long neglected but i refuse to leave our children with a debt they can not repay. And that means taking responsibility right now in this administration, for getting our spending under control ." Less than archive footage: US deficit: US debt: Average: 4.857145 Your rating: None Average: 4.9 ( 77 votes)
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