Peter’s Blog

I attended an interesting lecture last night put on by the University of Chicago GSB alumni club. Professor Erik Hurst gave an interesting talk about pensions. He argues that the old saw that people aren’t saving enough for retirement is false for the vast majority of people. A common reason people think retirees are impoverished is because their food spending, of all things, goes down. However, statistics show that the food they eat stays constant and the time they spend shopping and preparing food goes up – they’ve replaced expensive prepared food with raw ingredients that they prepare themselves. So know you know why grandparents everywhere seem to spend their entire days at the supermarket!

So who doesn’t have enough money for retirement? It’s approximately 20% of the population (in most OECD countries), and most of them have ‘involuntarily’ retired. Why retire involuntarily? Normally it is because of a ‘health shock’ (great phrase), in which bad health both costs people a lot of money and prevents them from returning to work. So, these people stop working earlier than they hoped to (or need to) and, at the same time, most countries have good insurance for health expenses but little for lost income.

Pretty interesting, huh? There’s also some interesting research Hurst did on the economics of bling.

BBC NEWS | UK | ‘Bring on the property crash’

I understand that it’s hard to buy a house in the UK when you’re young and making a basic salary. But what’s unsaid in this article is that you have people earning £20k a year (like one IT worker profiled) and people thinking it’s a good salary. It’s long been my conviction that British purchasing power is shit: numerical costs are only slightly lower, thanks to the strong pound, but wages are much lower. I would MUCH rather earn $40k in the US than £20k in the UK.

Bernanke Nods at Possibility of a Recession - New York Times

In his bleakest economic assessment to date, the Federal Reserve chairman, Ben S. Bernanke, said Wednesday that the American economy could contract in the first half of 2008, meeting the technical definition of a recession, and he encouraged Congress to help homeowners caught up in the mortgage crisis.

Unemployment is going up, the housing market is in freefall, the currency keeps sliding, you have just offered unprecedented loan guarantees of tens of billions of dollars to (previous) titans of the the financial industry – why yes, the economy just might, perhaps, potentially, eventually, in the worst case, with many qualifications see some trouble! What would really wow me would be if there wasn’t a recession. Way to go to all those ‘prudent’ reporters (The Economist especially) that have held off from saying the US economy is in recession until now.

Robert Reich’s “Totally Spent” Op/Ed in the New York Times is quite good.