Opinion

The Great Debate

Pensions and the coming savings boom

jamessaft1James Saft is a Reuters columnist. The opinions expressed are his own

The explosion in company pension fund shortfalls in Britain nicely illustrates issues which will dominate economics and investment in coming years: the re-pricing of risk, a disillusionment with equity markets, and the boom in savings these shortfalls will help to drive.

Under current accounting rules, the pension funds of companies in Britain’s FTSE 100 index are together 96 billion pounds ($170 billion) underfunded, more than double the deficit of a year ago and an all-time record, according to a report from pension fund consultants Lane, Clark & Peacock.

This is partly for the very positive reason that people are living longer but principally because of the dire performance of financial markets, especially equities, over the past year.

To make matters worse, the surge in corporate bond spreads, which are used to calculate the current value of pension plans’ future liabilities to retirees, has actually minimised how underfunded British pension plans look when accounting measures are applied. Minimised how underfunded they look, but not how underfunded they are.

BoE extends QE, fears 1930s re-run

John Kemp

– John Kemp is a Reuters columnist. The views expressed are his own –

The Bank of England’s decision to continue with its asset purchase programme, or quantitative easing (QE), at the rate of 50 billion pounds per quarter in Oct-Dec, unchanged from Jul-Sep, shows bank officials are more worried about ending support for the recovery too soon than about risking inflation by leaving it too late.

The problem with QE is that you have to keep buying the same amount of assets each month to maintain the same monetary stance. With interest rates, the Bank can cut them and they stay cut. If asset prices drop with QE, it represents a tightening of monetary policy.

Obama, Elvis and America’s birthers

Bernd Debusmann– Bernd Debusmann is a Reuters columnist. The views expressed are his own. –
Nobody ever landed on the moon, the televised images are a hoax. John F. Kennedy was murdered in a complex plot involving the Mafia and the CIA. Elvis Presley lives. Barack Obama was born outside the United States and therefore is ineligible to be president.

All these claims stem from conspiracy theories and myths born in the U.S. and they throw a question mark over the long-held view of experts that such ideas flourish most in societies where news is controlled, access to information difficult and barriers to independent inquiry difficult to overcome.

This kind of restrictive environment  applies to many Third World countries – conspiracy theories are particularly abundant in the Middle East and Africa — but not to the technologically and economically advanced United States. Yet there is a parallel universe inhabited by millions and millions of Americans immune to facts, logic and common sense.

Reduce the high cost of medical malpractice

diana-furchtgottroth–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

The next time you take your child to a doctor, scrutinize carefully the doctor’s bill.  What it won’t tell you is that an average of 10 cents out of every dollar you pay goes to the malpractice insurance doctors must have to protect themselves in case a patient sues them.

Malpractice premiums cost some doctors many tens of thousands of dollars a year, not because an individual doctor has a history of making mistakes, but because in some states juries make excessively generous awards knowing that insurance companies pay.

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