Monday, May 19, 2008

Perspective on economics

Here’s an interesting statement about economics.

      There is nothing complicated about finance. It is based on old people lending to young people. Young people invest in homes and businesses; aging people save to acquire assets on which to retire. The new generation supports the old one, and retirement systems simply apportion rights to income between the generations. Never before in human history, though, has a new generation simply failed to appear.

This is a response to some complaining by the German President about the present economic downturn (some would call it a crisis).   However the author wanted to point out that the larger elephant in the room isn’t how western capitalism functions and how corrupt it must be, but how unbalanced Europe has gotten demographically, how that stress on supporting the aging population  makes the economic downturn worse, and how that’s going to lead to an even worse crisis.

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