Today United was approved in being able to dump its pension obligations on the Federal government. This could open the floodgates for GM, Ford and others to run through bankruptcy and strip out their excessive benefit and pension plans. Should we be concerned? Is there a limit to have much obligation can be assumed by the US government?
Yelnick noted a while ago of the declining birth rates in the West and how it would lead to shrinking populations and lower growth, sparking a global scramble for yield. The scramble has already begun, as we sit in the low yield environment of the Kondratieff Winter. Now the mainstream punditry is picking up on this theme. The first week of May, the Wall Street Journal ran a first page column on retiring boomers withdrawing from growth stocks and moving their wealth (what they can hang on to) into income producing properties, depressing the stock market. McKinsey has also completed a study of The Demographic Deficit: How Aging Will Reduce Global Wealth. Their core message is that aging populations will save less and spend more, and governments will be pressed to fund all those welfare programs to support the aging, further reducing private investment. What these analyses have so far overlooked is the other side of the story: in a low return environment, how to pay for all of the unfunded obligations we have assumed? How to pay it back?