STOP making these retirement mistakes: Top Economist Warns

0:0045% of baby boomers have no retirement savings and they're now the fastest growing generation to become homeless. I think a lot of people are feeling as they're approaching their retirement age, that I'm working harder and harder with no side of retirement. We've been the victim of a failed ideology called neoliberalism. I only have about three months for to build payments in my savings account. We make very little own social security. I still have to work to pay my bills. I'm worried that my investments won't last me. I don't have any retirement funds put away at all. We don't want to find ourselves in the situation of working to 66 having no chance of retirement and really treating life today being like assisted dying. And there's so much asset price inflation as well, again caused by these policies that you can't afford to buy a house either. So you've got to work your butt off. You're trying to rent somewhere to live. You're suffering under a failed ideology. That's where neoliberalism has led us. We need to overthrow neoliberalism and we can do it with the right economics.

1:01We need the right politicians to follow that correct economics. Well my support staff have sent me a number of questions from viewers of my YouTube videos. And this one I thought was quite poignant and it really expressed I think a lot of people are feeling as they're approaching their retirement age, that I'm working harder and harder with no side of retirement. Is this senior assisted dying? It feels so bad. Now you are victims, workers of your generation, workers of my generation because I'm 60 years older, I'm 72. We've been the victim of a failed ideology called neoliberalism. Now a neoliberalism was first promoted in the 1970s. It basically said there's going to be so much growth that you won't know welfare in the future. And this is housed pumped out by its main salesman, Ronald Reagan. I hope history says of us that we were worthy of our past, worthy of our heritage. We can seize the moment, we can do our best for America to keep our future strong, seer and free. Our children will thank us and that's all the thanks we'll ever need. Well so much for all that.

2:01It took away your welfare because you're not going to need it. You're going to win so much more money in the future that welfare will be unnecessary. So they got rid of public state pensions and brought in 401k's and private pensions or superannuations they called it in my home country of Australia. But the reality is this set of policies delivered so to little growth that now at the age of 66 you can't afford not to work. And there's so much asset price inflation as well. Again caused by these policies you can't afford to buy a house either. So you've got to work your butt off. You're trying to rent somewhere to live. You're suffering under a failed ideology. And politicians who promise fiscal responsibility like Reagan did back then and what his successes are still doing today they're not your friends. They're your frenemies at best. They claim to be making things better for you. They're actually making things worse. We have to get rid of them. And I think finally the political will to do that is starting to rise certainly in the UK hopefully in some other countries as well. Now if you look at economic record of this particular philosophy

3:04it's a record of failure. The promise again was we're going to grow so much faster we get rid of all those silly Keynesian limitations on the private sector. The economy will last away and your wages will rise. You'll get more money. You'll be better off. You won't need the state's assistance. Well in fact United States growth and the growth of every developed economy on the planet fell when you compare the pre-liberal period to the post neoliberal period. I date the transition from 1975 basically because of that stage the rising inflation at that time just credited what was called Keynesian economics beforehand or was used as credit Keynesian economics. The neoclassicals talk over. They're the intellectual backgrounds in neoliberal politics and they expected a high rate of economic growth. That's not what happened. This is economic growth data from the Federal Reserve, the Fred databases they call it. And when you break it into pre-1975 and post-1975 that's in other words before neoliberalism and after neoliberalism

4:04the pre-neoliberal average rate of economic growth for America was 4.1% per year. After the neoliberalism when they thought they're going to be at a high level of economic growth 2.8% a huge fall and the average rate of economic growth. This is data from a different database so the numbers differ for America but the same basic trend applies. There isn't a single developing economy that did better courtesy of following those policies rather than doing worse. They all did worse. You can see the scale of the fall France from 3.6% per annum to 1.5 Germany from 4.3 to 1.6 Canada from 4.7 to 2% Australia from 4.5 to 2.4 It's a failed policy. The one thing it said it would deliver is greater rate of economic growth it failed. Now if we continued with the rate of growth that was achieved by policies before the neoliberals took over we would have an economy that's not four times bigger than it is today on real terms

5:04but almost eight times bigger. So you would have a much better living standard if the policies hadn't changed in the 1970s and not only has the rate of economic growth slowed down the proportion of GDP that goes to workers has also fallen quite radically data from the Bureau of Economic Analysis in America and it shows that the worker's share of GDP has fallen from 59% in 1970 to as low as 49% in 2014 So with GDP has gone up more slowly and the fraction of it that goes to workers has fallen workers have fallen by 10% and who's benefited who's got the other money the finance sector workers wages have gone down by 10% wankers in kapat and me bankers in come terrible me has gone up by 10% there's been a shift from the working class to the finance sector and that's really if you want to identify the group that benefited out of these insanely bad policies it's the finance sector not that overall population and certainly not the working class

6:05neoliberalism failed because it was based on the same sort of thinking that led to the great depression the belief that a deregulated private sector was the best guarantee of prosperity that government debt was a burden on future generations and this is Calvin Coolidge making this argument in his very last state of the union address he'd run a 1% of GDP surplus for pretty much the whole of the 1920s and that had reduced the level of government debt from 32% of GDP to 16% and he was convinced that this is what had caused the prosperity of the 1920s so in his final state of the union address in December of 1928 he said that a government surplus was a constructive economy in the highest degree it is the cornerstone of prosperity it should not fail to be continued well it continued until the great depression so just like neoliberal politicians and economists today ignored the level of private debt so did the economists of the 1920s and while Coolidge was crowing about reducing government debt from 32% to 16% of GDP

7:06private debt rose from 90% to 125% of GDP and at the same time as the government was running a 1% of GDP surplus the private sector was borrowing 5% of GDP per equivalent every year and that's what caused that the roaring 20s now that continued until 1929 and there were 1929 here everything went totally a cropper private debt plunge credit went from plus five to on census figures more than minus 30% of GDP sucking demand out of the economy and you had an incredible crisis and what we should have learned from that experience and Irving Fisher did learn because he suffered very badly as a neoclassical economist before the crisis an erratic economist on the other side he realized that what he called the two dominant factors in the great berms and depressions are over and dead and just to start with and deflation following soon after and we can see that again in the data here here's the increase in private debt that gave us the boom of the 1920s

8:09it peaks and plungers credit here running at about 25 and 10% of GDP it then plunges to minus 35% as that happens the unemployment goes from virtually zero in 1929 to 25% of the population being out of a job that's what we should have learned from now fortunately Roosevelt did listen to Fisher and he blamed the finance sector for causing the great depression and he's a inaugural speech in 1933 practices of the unsprupulous money changes stand indicted in the court of public opinion rejected by the thoughts and minds of men through they have tried but their efforts have been cast in the pattern of an outlawed tradition faced by failure of credit they have proposed only the lending of more money and that's what our politicians these days are doing as well we should have learned from experience the great depression should have warned us to worry about private debt and not obsess about government debt world war two did teach us initially

9:11that the government is self-financing it was funded by the deficit rising from 5% of GDP during the 1930s to 25% in 1943 an unemployment fell from 19% in 1938 to 2% in 1943 here's the figure the deficit goes up unemployment goes down and a dramatic turn around from the horror of the beginning of the great depression but a 25% of GDP deficit that must have caused rampant inflation mustn't it well now it didn't there wasn't hyperinflation at all in fact the inflation rate actually fell as the government deficit rose and it rose as the government deficit fell on the other side inflation was minus 2% in 1938 and remember Fisher said his deflation is one of the things that gives you great depressions so you don't want falling prices it rose it peaked at about 7% in 1942 but it fell to 2% by 1945 and only started rising on the other side as the government deficit fell

10:12so the conventional explanations just don't make sense of the actual history and inflation was controlled at that stage not by interest rates but by policies administered by such people as John Kenneth Galbraith who's the opposite of a mainstream economist that included worker and firm agreements on wages and markups credit guidance for banks policies are now being shamped by another non-orthodox economist Isabella Weber today it's not the Federal Reserve that can control inflation using the interest rate we need to make agreements between the different humans that can actually cause inflation which is workers on the one side firms on the other and cost of energy bringing up the rear this experience in the great depression completely changed how policy makers thought about how the government was financed and in 1946 the then chairman of the New York Federal Reserve wrote a brilliant paper called taxes for revenue or obsolete they realised that taxes don't raise funds for the government the government in fact creates the money that it needs for spending

11:13and this was the argument that Coolidge put here so the necessity for a government to tax to maintain its solvency is true for state governments but it is not true for a national government two changes of the greatest consequence of occurred in the last 25 years the first is the gaining a vast new experience in the management of central banks and the second is the elimination for domestic purposes of the convertibility of its currency into gold forget about the bond vigilantes this is somebody who saw what was done by huge bondage issues during the 1940s it didn't finance the war it reduced the spending power of the private sector to a reserve as much as possible the spending power for the military industrial complex to fight the fascists so here's what that did according to a governor of the New York Fed in the 1940s final freedom from the domestic money market exists for every sovereign national state where there exists an institution which functions in the manner of a modern central bank and whose currency is not convertible into gold or into some other commodity

12:14that's what we should have learned from the great depression now these are the practical lessons the rise and fall of private debt is what causes economic berms and busts in a capitalist economy and government spending can stabilize that credit cycle reduce the size of the berms also reduce the depth of the slumps and government spends by creating money not by borrowing it and government systems can actually complement each other the private sector can deliver the goods and innovation in the private sector and this is where the benefits when the goods are restricted primarily to the person buying the goods and industries where profits don't depend on extremely long-term investments private sector can't finance without running up impossible levels of private debt now public goods this is where the public sector should come in things which the private sector can't make a profit out of goods where the benefits extend beyond the buyer things like health and education benefit everybody that's what we realized after World War II also industries that need extremely long-term investments things like water and sewerage and power

13:14all the things we've privatized in recent years and delivered far worse service than used to exist when these were public institutions so these were lessons we should have learned why didn't we? because neoclassical economists and particularly a little institution called the Montpelloran Society which brought together people like Hayek as well as the other neoclassical economists they ideologically opposed these lessons they believed in the myth of a self-regulating free market system and neoliberal politics was born as a blend of this obsolete economics that should have been thrown out after the experience of the nine in 20s, 30s and 40s the blending of that with progressive political policies from labor parties in Australia and America and the UK that's what gave us neoliberalism now just like their predecessors at the time of the Great Depression ignored the level of private debt so did these economists this is data which takes a level of private debt right back to the 1810s and government debt back to the 1790s

14:15and you can see that throughout this is American data throughout the whole thing the private sector is always getting caught in private debt bubbles the government's always trying to reduce its debt levels when it does get them to extremely low levels the private sector goes into a berm in bust and the worst of the lot was the 1930s when private debt peaked at about 130% of GDP by ignoring the lessons of the Great Depression we end up with a peak level of private debt in 2007 of 170% of GDP neoliberalists forgot history they don't learn from history they ignore it if you take a look at that history you can see that credit caused the boom of the 1920s and the bust of the 1930s this is the correlation between change in private debt and the level of unemployment when credit goes negative, unemployment rises when credit goes positive, unemployment falls it's an extremely strong correlation and neoclassicals ignore this data because it contradicts their prior beliefs this has been bananke supposedly an expert on the Great Depression

15:15and he ignored this data he ignored the debt deflation arguments of Irving Fisher because he said Fisher's arguments were less influential amongst academics because of the counter argument the debt deflation is no more than a redistribution from one group debtors to another group creditors now this is nonsense in its own right because if you go bankrupt you don't pay your creditors back it's how disconnected from the real world this whole intellectual tradition of neoliberalism is but he then says absent implausibly large differences in spending propensities pure redistributions should have no significant macroeconomic effects this data was available when bananke wrote those lines he doesn't even look at it the supposed expert on the Great Depression was in charge of Federal Reserve when the Great Recession hit and he completely ignored this relationship as well he hasn't even checked it in his most recent papers after he was awarded the Nobel Prize in Economics that's like giving the arsonist a prize for putting out a fire and the arsonist didn't even realize that he set the house on fire

16:17in the first instance credit overwhelmingly dominates economic activity when you have rising credit you have falling unemployment when you have falling credit particularly when it goes negative you've got rising unemployment and they still haven't checked that data to this day having forgotten the Great Depression they recreated the conditions which caused it and you can see this by comparing the global financial crisis to the Great Depression and looking at the level of both credit and the deficit and the rate of inflation so here's the data from the 1920s to 1940s and this is the data from 1990 through to 2015 and you can see the first of all the credit bubble that we experienced in the global financial crisis was actually bigger than the credit bubble of the 1920s credit hit 15% of GDP and 2006 versus a peak of about 5% just before the Great Depression began there was a larger government response this time round not because the government did it deliberately but because the government's much bigger than it was back in the 1930s and therefore the scale of the automatic stabilizers

17:20and affect a much larger so the peak of the government deficit during the New Deal was worth about 5% of GDP but the peak of the government deficit during the global financial crisis was 12% of GDP and this played a major factor in deflation not being as extreme during the global financial crisis as it was in the Great Depression deflation hit as much as minus 12% per annum prices falling by 12% per annum in the 1930s the maximum rate of decline of prices during the global financial crisis which you can only see with monthly data was minus 2% per annum what it meant was negative credit wasn't as negative as it got to be during the Great Depression so whereas on census figures the level of decline in credit-based demand was equivalent to losing 30% of GDP in one year in the peak of the global financial crisis it was minus 5% still severe but nowhere near as bad as it was back in the days of small government so a fundamental component of this neoliberal fantasy is what they call

18:23fiscal responsibility run government services to reduce government debt and you achieve balanced budgets by reducing programs and who do you knock off let's knock off the low income earners you get rid of pensions you reduce public education you quarterize public health but you don't change defense of course when nobody ever says how are you going to pay for it when what you're paying for is a bomb and of course that benefits the military industrial complex as well so this took away the income supports that used to exist in the Keynesian days those bad Keynesian days for low income earners you had lower unemployment benefits coming out of it lower pensions meaning you can't afford not to work and higher education costs and higher health costs so you can't afford to get educated and you can't afford to get sick now rather than causing economy to grow more rapidly which was the myth the neoliberals believe themselves and soldier the rest of us it reduced the rate of growth of the economy it reduced the amount of money being created by the government in the first instance

19:23and it ignored that credit was being used to finance housing bubbles and share market speculation rather than productive enterprises that happened back in the 1950s so they took the economy away from the workers and investors and they gave it to the gamblers and they let loose what Karl Marx once beautifully called the roving cavaliers of credit and they're the ones who are in charge of the economy today his Marx writing in what the third volume of capital with a wonderful attack on what happens when he let the finance sector run a capitalist economy a high rate of interest can also indicate as it did in 1857 that the country is undermined by the roving cavaliers of credit who can afford to pay a high interest because they pay it out of other people's pockets and meanwhile they live in grand style and anticipated profits and talk about centralization says Karl the credit system which has its focus in the so-called national banks and the big money lenders and usurers surrounding them constitutes enormous centralization and gives to this class of parasites the fabulous power

20:25not only the periodically dispoiled industrial capitalists but also to interfere in actual production in a most dangerous manner and this gang knows nothing about production and should have nothing to do with it on this note Marx and he will know about capitalism than Marshall ever did and this is one reason I think what China has done so well because it's ignored Marshall and listened to Marx without the handicaps of Marx's wrong ideas like the labor theory of value so because the roving cavaliers of credit were in charge of our economy these days then we've reduced growth caused by government spending and they've encouraged money growth by private speculation and so they tell you know borrow our house the house has always got in value you can't lose or why do they? it's largely because the rising level of private debt causes that increase in house prices you can't see it when you look just at the aggregate level of household debt and the aggregate house price index but what's actually driving that increase in house prices is rising levels of new mortgage debt and that keeps on going into the bubble bursts

21:26so what we have is economic growth becomes a side effect of gambling on house prices with borrowed money and this is the strength of the relationship again something the mainstream completely ignores this is analysis I first developed back in the early 2000s it's since been systematized by a number of different researchers it's still ignored by the mainstream today they simply don't want to know that private debt causes bubbles and busts so what we've had courtesy of that letting the financial sector take over is that asset prices have risen and that's made the rich even richer and the poor even poorer so working class and middle class people these days can't afford to buy a house sometimes can't even afford to rent a house and so we have this horrific situation that in America's case roughly speaking the real wages remain constant since 1970 but house prices have increased by a factor of four in a bourbon bust cycle so you get excluded by lower rate of economic growth you get a lower share of GDP going to the working class

22:28and the middle class and you get a higher priced asset assets like houses and shares which put them out of your reach in the first instance now there is an alternative to all this stuff Maggie Thatcher of course famously declared Tina there is no alternative well this is typical western economic thinking you're either right wing with American capitalism or you're left wing with Soviet socialism but no bird flies with just one wing okay birds have two wings and we should think about this rather more deeply because the eastern philosophy of the year in Yang is both more realistic and more about harmony you combine stability in order from left wing with creativity and chaos from the right wing and China I think is showing us what this can mean because China has aimed for this balance between the two wings if you've been to China in recent years you know how much China succeeded on this front the state provides the infrastructure on the public goods the private sector provides the consumer goods it's been far more successful than both economic growth

23:30and increasing people's welfare than any other society in history so the west is trying to fly with just one wing and fails for the private sector for everything a one winged bird flies badly as the last 50 years have shown we need to revive the left wing the same way that the Chinese have done by getting the state to do the long term thinking and the long term infrastructure and let the private sector innovate in the short term so we need true leadership and I can't think of a greater source of wisdom than to go back to Roosevelt and see what he learned on the approach to the Great Depression I don't think we can get a greater source of wisdom than going back to listen to Roosevelt he's opening speech as president of the United States of America at the absolute depths of the Great Depression and this is how he explained the dilemma and how to get out of it Wendy is at our doorstep but a generous use of it languages in the very side of the supply primarily this is because the rulers of the exchange

24:33of mankind's good have failed through their own stubbornness and their own incompetence have admitted their failure and have advocated practices of the unsprupulous money changes stand indicted in the court of public opinion rejected by the thoughts and minds of men through they have tried but their efforts have been cast in the pattern of an outlawed tradition faced by failure of credit they have proposed only the lending of more money stripped of the lure of profit by which to induce our people to follow their false leadership they have resorted to exhortations pleading carefully for a stored confidence they only know the rules of a generation of self-seekers they have no vision and when there is no vision

25:34the people perish yes the money changes have fled from their high seats in the temple of our civilization we may now restore that temple for the ancient truth the measure of that restoration lies in the extent to which we apply social values more normal than mere monetary profit happiness lies not in the mere possession of money it lies in the joy of achievement in the thrill of creative effort the joy of the moral stimulation of work no longer must be forgotten so we have had 50 years now of a damaging philosophy which has done a enormous harm to our societies and reversing the damage will not be easy but at least the potential now exists for that to happen and we need political leaders who reject neoliberalism

26:37to take over from the psychopaths of the finance sector that have dominated political decision-making for the last half century United Kingdom actually has a reasonable chance here because they now have three anti-neiliberal parties you have the Greens under Zach Polanski the workers party established by George Galloway and your party by Corbyn and Saltana all of them are share one thing in common which is an opposition to neoliberal thinking now the rest of the world is still waiting for anti-neiliberal politicians to arise i hope they will but when they do they need a new and realistic economics not the nonsense of neoclassicals which deliberately fails to learn from history because history contradicts neoclassical thinking neoclassical economics provides fantasy dressed up as realism and tells you not to look at history don't look back on time and see what's happened before when we've tried our policies and they've failed this time is going to be different it's always the same recipe okay so i've developed that new economics based on the great work of previous non-orthodox thinkers

27:38people like Irving Fisher and Shroompader and Minskian Marx and Keynes and so on and i've also built this in conjunction with many fellow economic realists today people are called themselves post-cansions or work in complex systems economics or evolutionary economics there is an alternative way to understand the economy which is realistic and which fits the data so you can learn that if you join me in my seven-week rebel economist challenge and help me overthrow neoliberalism which is a change a political and social change we desperately need we don't want to find ourselves in the situation of the original viewer whose comment armors liberating upon here working to 66 having no chance of retirement and really treating life today being like assisted dying that's where neoliberalism letters we need to overthrow neoliberalism and we can do it with the right economics we need the right politicians to follow that correct economics politicians keep saying the economy is strong you're rent in your bills say otherwise when you look at the right numbers

28:39the official story falls apart if that resonates with you you're probably like the 22,000 others who recently requested one of my three books inside my new rebel economist bookbundle the bundle is worth $50 but you can get it while it's free this week link the link in the description or go to stevecane.com once there click on the black button enter your email and in about 60 seconds will email you free access after that if you want to study with me personally with live lectures each week and use the proprietary tool you saw me using this video called reveal there'll be an optional invite to apply and join my private group of like-minded economic rebels again that's stevecane.com or click the link in the description