NEW ECONOMIC TERM REQUIRED. COSTIVITY?

Seriously, is EVERY pension in the US guaranteed by the Government? You are quite sure about this? I must investigate. Well, it does not apply in NORMAL countries! But in any case, your local authority probably has money in bonds, at least transiently, and you will likely have to pay higher local taxes if their value collapses, so a bond bubble burst does affect others than bond investors.

Jo, I have been over this three times now and if you don't grasp what I am saying by now I may as well give up.

BUT I EXPLAINED THE REASONS TO YOU! And your comment was "There are some truthful statements in there."
THERE IS NO INFLATION in your meaning of the word. THERE IS NO LEVATION to use the word I prefer.
But there has been rampant money supply inflation and it has caused a bond bubble (and driven up some other asset prices). Inflating the currency generally leads to trouble. I think the bond bubble will burst; that is, I think bond prices will shake down severely, and very likely alarmingly with wider economic consequences. You think there are powerful tools to prevent that. I very much doubt it. A couple of years from now we shall know who was right.

 

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Yes, every pension in the US is guaranteed by the government. I guess you must investigate. It's guaranteed through an agency called The Pension Benefit Corporation. I'll help you out with your research. https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

What is a "normal country"? Is Japan "normal"? Is Germany "normal"? Because they all have a government guaranteed pension plan, and there are many more.

Why would local authorities hold bonds? They issue bonds, they don't buy them. They are not investment companies. So no, since they don't own bonds, the wouldn't be affected in the way you described. As I said before, bond owners would be adversely affected. Pensions, if heavily invested in bonds, would be affected. Everyone would be affected in this since, interest rates would rise. The cost of debt would rise, and that affects virtually everyone. But here is the thing you keep ignoring, central banks have tremendous ability and power to control bond prices (i.e. interest rates). It's basic central bank blocking and tackling.

As I said before the word "bubble" has become vogue but it has little value beyond being trendy. As previously and repeatedly explained to you there are good reasons why bond prices are high and contrary to your assertion there is no reason why these prices cannot hold indefinitely if need be...the operative words being "if need be". The US central bank has kept bond prices high for almost a decade (i.e. 8 years) and only recently began raising rates (i.e. lowering bond prices).

No you haven't. You have been repeatedly asked to define your new word, and you have repeatedly failed to do so. What is it? How is it measured? What you have done is say you are not happy with the word inflation and you want another to word to show a relationship between the volume of money and inflation, so that this mythical pent up inflation you believe is out there can be measured. One of your problems is that mythical "pent up inflation" doesn't exist. The relationship critical to your belief doesn't exist. Because as has been repeatedly explained to you, it takes more than increased money supply to cause inflation.

As I have repeatedly pointed out to you your new word is a belief based on a host of economic fallacies. That's why you cannot specifically define it. That's why you cannot quantify it.

The words I use are the words commonly used by economists, financiers, and other business professionals. The money supply has grown for the last 7 years. But inflation has remained virtually zero for the reasons previously explained. You seem unwilling or unable to understand why that is so. As has been repeatedly explained to you there are too factors needed for inflation: money supply and too few goods and services. We don't have a supply problem, therefore, we do not have and have not had inflation. And I don't see that changing in the foreseeable future. What we have had is lagging aggregate demand, and that has been and remains a global problem. That's the real problem. And that is why we have had virtually no inflation over the course of more than 7 years of quantitative easing (i.e. monetary expansion).

As I have told you many times before you can reinvent the lexicon, you will need to clarify your thoughts, specifically define them and make a compelling case for change. Thus far I haven't seen any of that. Making these vague generalized statements isn't going to cut it. The problem you have is your economic beliefs are deeply flawed for all the reasons that have been repeatedly explained to you.

 

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If you have read that, you seem to have employed the same powers of incomprehension that you have applied to what I have written. Every pension is not guaranteed, and certainly not to the full amount. So US is a normal country after all, with a limited system of pension guarantees.

Because they do not live hand to mouth. They have reserves; and the amount of money they hold likely varies quite considerably through the year.
Check it out! A large local authority will likely have a mix of bonds/bills, fixed accounts, notice accounts, overnight money, as well as regular bank accounts -- and vary the mix as circumstances dictate. True they will almost certainly use short term bonds and not lose their shirts. And to be truthful, so pitiful are the yields that bonds/bills may not feature much these days.

Have you not yet gathered that I am using LEVATION as the equivalent to your word INFLATION, by which I assume you mostly mean consumer price inflation; and that I am doing so because I choose to use inflation in its original sense of currency inflation, i.e. increases in the volume of money.

You keep on repeating to me over and over again things of which I am already completely aware, and reading into my text things I have never said. The pen in which the currency inflation is "pent up" is the bond market, mostly. As long as it stays there it will not drive up the price of groceries.

 

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LOL...before you go accusing someone else of "incomprehension" friend you should take a long and serious look at yourself. The link I gave you does say every pension is insured by the federal government. There is a limit - a very generous limit which is well above the median income-, but that limit doesn't negate the fact that every pension is insured by the federal government.

I think you got hung up on the words "defined contribution plan". A defined contribution plan isn't a pension. It's a retirement savings/investment account where employees contribute a portion of their pay to a retirement savings/investment account and employers may make a small matching contribution to that account. There is a difference between a pension and a savings account. So the only one guilty of incomprehension friend is you.

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Local authorities vary, some have reserves some don't. Reserves by definition are very liquid. They aren't long term investments. So any bond investment would have a maturity of one year or less and therefore would not be significantly impacted by interest rate changes up or down. Most "local authorities" keep their reserves in overnight money market accounts or bank accounts. So you seem to have contradicted yourself by admitting any interest rate change would have little impact on local authorities.

Have you not gathered it's silly? Why would anyone want to replace a well accepted and well known and understood word with a word you have invented? Are you now not using your invented word "costivity"? The whole point of a language is to communicate and be understood. That's why we have dictionaries. If everybody decided they didn't like certain words and invented new words more to their liking, we would soon all be speaking and writing gobbledygook and we wouldn't understand each other.

Well if you know those things, why do you keep making the same mistakes? You cannot point to anything in the bond market and say that's inflation. Because it doesn't exist. Inflation is more complex than you seem to be able to appreciate. And you tend to do a lot of broad-brushing. Inflation does not now exist, and it will not exist as long as the money supply and aggregate demand are kept balanced. Too much aggregate demand will cause inflation any time that condition exists regardless of the money supply. We don't have a problem with too much aggregate demand. We have a problem with too little aggregate demand. And that's why we don't have inflation. And central banks have powerful tools at their disposal to manage aggregate demand. It's much easier for central bankers to slow aggregate demand than it is for them to stimulate or increase aggregate demand. And that's why we need more stimulative fiscal policies.

 

So do you still maintain that statement?

I'm sorry. I'm so dumb you'll have to point that out to me.

Uh? So all the websites using the term "defined contribution pension", or "defined contribution scheme" and classifying it as a type of pension have got it wrong? Is this some weird legal definition of pension you've got hold of. Why not use the word the way everyone else does?

As for the rest, there seems to be no getting through to you. Look, why not ask a friend to explain it to you?

 

Well, I wrote much more than that, and yes I standby all of it. I also wrote that rising interest rates would slow the economy and hurt everyone. And I also wrote as recently as my last post, the central banks have a great powers and abilities to control interest rates.

If you cannot read, then there is nothing I can do to help you. It has already been pointed out to you.

LOL...oh, and where are all these websites? Given your penchant for specious sources, I wouldn't be surprised if you could find a few. A defined contribution plan is defined below for your edification. Defined contribution plans are not pensions for all the reasons previously explained to you.

"A defined contribution (DC) plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis.[1] Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employer contributions and, if applicable, employee contributions) plus any investment earnings on the money in the account. Only employer contributions to the account are guaranteed, not the future benefits. In defined contribution plans, future benefits fluctuate on the basis of investment earnings. The most common type of defined contribution plan is a savings and thrift plan. Under this type of plan, the employee contributes a predetermined portion of his or her earnings (usually pretax) to an individual account, all or part of which is matched by the employer.[2]

In the United States, 26 U.S.C. § 414(i) specifies a defined contribution plan as a "plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant's account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant's account."

While Defined Contribution plans are sometimes referred to as pensions, they are not. The word "pension" is defined as "a fixed amount, other than wages, paid at regular intervals to a person or to the person's surviving dependents in consideration of past services".[2] In contrast, a Defined Contribution retirement plan is an arrangement where an employer, during the time a person is employed, puts money in a registered retirement account on the employee's behalf. In general, a DC plan provides much less security for the employee, and much less obligation for the employer, than a pension." https://en.wikipedia.org/wiki/Defined_contribution_plan

But then you don't like dictionaries.

Well here is the problem, they are not advocating changing the meanings of words. They are not advocating your cause. Thus far I have only seen one person advocate your cause and that's you. You haven't made a cogent case for changing word meanings. Hell, you can't even decide on what you are going to call this new word of yours. It keeps changing, you keep changing it.

 

Just tell me precisely where to find it, i.e. this claim that all US pensions are guaranteed by US Government.
Because if you look at the PBGC site itself, it explains what it does, and what is does not, guarantee.
Any by the way, the PBGC is not the US Government. I guess the Federal Government might bail it out if necessary, though.

I was genuinely surprised by the Wikipedia definition of pension, which does not correspond with British usage, see for example, https://www.gov.uk/pension-types
However, I would expect most retired Americans to describe that monthly payment check as their pension regardless of the nature of the scheme. I am open to correction on that.

 

Yes, and if you understood what you read, it's virtually every pension. The unfortunate fact for you is pensions are guaranteed, not only in the US but many other countries as well.

Going a bit further, pensions are becoming rare as most companies have replaced them with defined contribution plans.

Oh, I think you need to go back and reread previously presented materials. The PBGC is an agency of the US government. I suggest you read the PGBC website you referenced. It clearly and unambiguously stated it is an agency of the US government on its website. The PBGC is part of the US Department of Labor. It's headquartered inside the Department of Labor building next to the capital building in Washington, DC.

When I graduated from college many years ago, a friend of mine was a presidential intern and he was assigned for a portion of his internship at the PBGC. I would visit him at his office at the Department of Labor. So you are factually incorrect once again. The US government uses a number of agencies. That doesn't mean those agencies are not part of the US government. It's employees are US government employees. It's part of and managed by the US Department of Labor. It is led by the US Secretary of Labor who reports directly to the POTUS. It's charter was created by the US Congress.

"PBGC is headed by a Director, who reports to a board of directors consisting of the Secretaries of Labor, Commerce and Treasury, with the Secretary of Labor as chairman.

Under the Pension Protection Act of 2006, the Director of the PBGC is appointed by the President and confirmed by the Senate. Under prior law, PBGC's Board Chairman appointed an "Executive Director" who was not subject to confirmation.

Thomas Reeder was confirmed as director by the Senate on October 8, 2015. Prior to joining PBGC, Reeder served as benefits tax counsel in the Office of Tax Policy atTreasury.[4]"

https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation#Leadership

So by the way, you are wrong again.

 

Well, you still haven't told me where to look exactly, but I see that you have retreated from "all" to "virtually every" pension. But it seems to me that the PBGC is about workplace pensions. It was after all set up by the Employee Retirement Income Security Act of 1974. Is "virtually every" pension in the US a workplace pension?

Yes; so will all these people will be vulnerable at one remove to a bond market crash?

I don't quite understand the technical ramifications of something being both "independent" and a "government agency", but it does not seem a matter worth pursuing.

 

Well we obviously have rather few people watching this thread or they would be pulling you up over all sorts of mistakes.

This is very petty. I initially suggested Costivity, saying almost at once that I did not like it, and replaced it with Levation, which is not perfect either. What word chosen hardly matters.
The point was to be able to draw a distinction between
[1] money/currency inflation (i.e. the increase of in money supply which you admit we have, and have even approved the motive for), and
[2] price inflation (which we do on have).
Why the devil you keep claiming that I am saying we have inflation your preferred sense (i.e. of price inflation) is beyond me.

Why don't you want the word inflation applied to rising bond prices?
And don't you think monetary policy has something to do with it?

 

Uh, yeah.

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How else do you think pensions are earned?

As has been previously and repeatedly explained to you, bondholders would be adversely affected. So if "all these" people (i.e. owners of retirement accounts) held bond obviously they would be adversely affected by a crash in the bond market the degree to which they would be affected depends on the exposure and maturity of the bonds. And everyone would be adversely affected by rising interest rates, if interest rates were allowed to rise. As has has been repeatedly explained to you, central banks control interest rates, it's one of the things they do to control aggregate demand and maintain pricing stability. And there is no reason to expect central banks will not do their jobs.

Yeah, that's one of the things you don't understand. Whither a government agency is or isn't "independent" it has nothing to do with its status as a government agency. This is again, an example of why those word definitions you don't like are important.

Simple Definition of agency

• : a business that provides a particular service
  
  
• : a government department that is responsible for a particular activity, area, etc.

http://www.merriam-webster.com/dictionary/agency

The US government operates a number of "independent agencies" including NASA. Just because a government agency has the word "independent" in its name, it doesn't make that agency any less of a government agency (e.g. The Pension Benefit Guarantee Corporation).

 

LOL....as evidenced by this long series of posts, the only one making "all sorts of mistakes" is you. Unfortunately for you, the posts speak for themselves.

Yes, you have stated you think a new word is needed, and you have changed your new word during the course of this discussion. I have pointed out to you, your new word isn't needed. There are many words used to describe money supply in great detail. There are words used to describe the velocity of money. Money is well defined and well reported. We have words and terms to describe inflation, and inflation is well defined and well reported. So why do we need a new word? That's something you have been consistently unable to answer. As has been repeatedly pointed out to you, you really can't define your new word in any meaningful way or explain why it would be better than the words currently used.

I don't know what you mean by that. What is my "preferred sense"? You have repeatedly stated you believe there is all this dammed up inflation sitting in the bond markets. I have repeatedly said that's fiction and I have repeatedly explained why.

Well, you are mixing a lot of stuff that shouldn't be mixed. When we speak of inflation, as has been repeatedly brought to your attention, we are not speaking about an increase in bond prices or any single commodity or service but a generalized increase in prices across the economy. And bond prices can rise for reasons other than inflation (e.g. risk). Apparently, you don't understand bond pricing and how bonds are priced. That's why inflation isn't measured by changes in bond pricing. This is again one reason why words need to be specifically defined. As previously pointed out, you have a penchant for glossing things over.

What would lead you to believe I have even hinted monetary policy doesn't affect bond pricing? If you believe that, I suggest you go back and reread my posts, and you only have to go back one or two posts to dispel your assertion notion. I have repeatedly posted how monetary policy affects bond pricing. You are using a straw man or you didn't understand previous posts.

You want to replace a word which has been well defined and is well known and well accepted with a word you can't even decide what it is, much less define it in any meaningful way. It all keeps changing. And since you cannot define it, much less name it, and you can't explain why it is better, it's nonsensical.

 

So I guess you object to expressions like house price inflation as well?

 

Well, you still haven't told me where to look exactly, but I see that you have retreated from "all" to "virtually every" pension. But it seems to me that the PBGC is about workplace pensions. It was after all set up by the Employee Retirement Income Security Act of 1974. Is "virtually every" pension in the US a workplace pension?

I notice you have not answered this question yet.

 

Why would I object to expressions like house price inflation? I'm not the guy who is making up words. You are? I'm not the guy who wants to change word meanings. You are. You are being either dense or disingenuous. I've already provided you with the definition of inflation. I'll do it one more time for you edification.

"In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.[1]" https://en.wikipedia.org/wiki/Inflation

You are the guy who claims to have had a formal education in economics. If you had that formal education, you should know this. Now if you want to add a qualifier like "house price", fine. That doesn't change the definition of inflation.

 

LOL...have you now.

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The fact is, it has been answered many times. Your continued refusal to accept reality isn't my problem. Where do you think people get pensions, if not through the workplace? The unfortunate fact for you, is pensions are earned in the workplace. They are not gifted. They are not inherited. They are earned in the workplace. Just where do you think pensions are earned if not through the workplace? What are and where are all these "non workplace" pensions think exist? The unfortunate fact for you and contrary to your assertions, pensions in the US and many other countries around the globe are insured by government.

Why am I not surprised, you are obfuscating? The issue here was your attempt to create new words and change word meanings - remember?

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