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American Capital Agency Corp. Message Board

  • wikidavis wikidavis Nov 9, 2013 3:21 PM Flag

    Leaving the workforce in droves....

    From Entrepreneur 11/8 13

    " No, sadly, more people are simply leaving the workforce. Here is the scariest part: As Zero Hedge notes, at this rate, the number of people out of the labor force will surpass the number of working Americans in about four years.

    Ponder that a moment. There will be more people not earning a regular income from their labor than there are people collecting a real paycheck. In the simplest terms, more takers than makers. Even if that rate slows, the overall trends are terrible. Participation has been collapsing since 2008.

    There are business and policy considerations that come from having a country where more people don't work than do. First, think of government policies. No matter where one stands on the debate over safety-net programs like welfare and food stamps, or massive federal undertakings like Obamacare, everyone agrees that those need taxation to fund them. Taxes come from businesses and individuals. Both groups, though, when takers outnumber makers, will have less in income off which to be taxed.

    You might argue that a healthy chunk of the non-working population will have non-government income, in the form of drawdowns from investments squirreled away for retirement. True, but this will trigger a negative market effect. Using retirement savings requires selling securities. The more people selling against fewer people buying since fewer are employed, means a drop in asset prices. Markets have been fueled by the steady stream of 401(k) and pension purchases over the past few decades. That will trickle as more people sell than buy."

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    • Hey morons short and SFB tea baggers, do you know why the workforce is contracting?

      Pssssssh, It's called RETIREMENT.

      The baby boom bubble is starting to retire and that is good news for the economy.

    • top

    • Europe is already there in several countries, this is the DEPRESSION CYCLE, after decades of overspending, we had the same thing in the 1930's, Hitler gained power from it, rallying the unemployed youth and took political power using it and almost took over the whole world. But all the countries had huge unemployment 30-50%, back then. WWII solved alot of that, with 100's of millions killed, soldiers, civilians, death camps. So we are saddened to hear of the people leaving the workforce, at least they are being inducted and going off to land on beachheads in war. We are seeing a great generation pass on before us, not many veterans who experienced the Great Depression and WWII left, who held our attention and admiration since most of us were toddlers. Their lives and experiences are amazing, hard to fathom by us. Truly a remarkable period of history and in produced some very great people who went on to create the BABY BOOM generation, to make up for the 100 or more million people lost to WWII. Now here we are, everyone has too many people who need work for economies too mechanized and automated. Defining the problem correctly and then watching politicians come up with solutions will be something to watch. Will it be War this time, or will it be less medical care to increase mortality rates. No one knows, but be on the watch and prepared to act to protect yourselves.

    • This is one of the most profoundly important posts I've ever seen on a message board. A reduction in the percentage of the population that is employed is having and will continue to have an overwhelming effect on our country.

      First, some basic economics. The wealth of a country is equal to the quantity of goods and services produced by its population. To the extent that the country consumes more than it produces, its debt to foreign countries must increase. If there is no means by which production and consumption will come into balance, bankruptcy is the inevitable result. It's just a matter of time.

      If the working percentage of the country's population is falling faster than the increase in productivity, the output of the country will decline. This must result in a reduction in the average standard of living, unless borrowing from foreign countries to pay for imports increases to offset the decline in domestic production. The matter becomes worse when the population of the country increases faster than total employment, which is the case in the USA.

      Since we in the USA refuse to accept a reduction in our standard of living, we come up with government programs to give a false sense that all is OK. For example, unemployment benefits are extended. The Fed is also playing a major role in contributing to the problem. They keep interest rates low to facilitate borrowing for the purpose of increasing consumption.

      • 2 Replies to yahutag
      • Any country with an aging population will have this problem. The fact is that the biggest problem we have is that the rich get all the income growth. That is the problem that must be addressed.

      • I've long been aware of the fact that the number of people who are working to pay the SS benefit to a single retiree has been dropping, but expected the age required to qualify for SS benefits to be increased. But perhaps I've overestimated the average IQ or our congress, because such an adjustment should have been made by now.

        The recent, sharp drop in the percentage of people in the work force has serious implications if those who are withdrawing from the workforce never intend to return. If there is a large number of older people who are choosing to retire younger because a new job is just too hard to get, and they believe they can survive on existing government welfare programs, we are in trouble. The Fed may be causing problems in this area also. To the extent that QE pumps up asset prices and causes potential retirees to believe they have enough to retire, the Fed is actually encouraging a reduction in the size of the work force. When QE ends and the tide goes out, a large number of retirees may find they are swimming naked.

        There's no doubt but that this situation will resolve itself, with negative financial consequences for all. China may now be trying to enhance consumption because they realize that the USA is becoming a bad financial risk, so want to reduce lending to us. The likely first step toward disaster will be an increase in interest rates as foreign countries reduce lending to the USA. This would ordinarily reduce domestic consumption; that is, unless the Fed continues to depress both short and long term rates, which hides the basic problem. If the Fed should stop doing what it's doing quickly, the recession will be breathtaking. All equity prices will collapse.

        With respect to AGNC, a weak economy fosters low short term interest rates, which helps AGNC. However, the initial reaction to our current problem will be a rise in long rates, which will dramatically reduce AGNC book, and the AGNC stock price will collapse with it.

    • Solution is to allow more Mexicans in the country, they reproduce faster than gringos.

    • Zero Hedge told me to get out of MS in the single digits for reasons that were fearful, I'm glad I bought more instead.. I like to Ponder that moment..

    • Board members...I draw 10% of my funds out of my IRA every year and my IRA keeps growing in size (it has not even stayed the same yet)...because I am debt free and my children are raised, my retirement income is over twice as much as my pre-retirement income was (S.S., company pension, investments and etc.)...if an person draws 8% a year out of an IRA and the IRA earns only 6% a year, the payments will last over 20 years...'my IRA may live longer than me'...! $tagg...!

    • That has long been a foreseeable consequence of holding the retirement age at 65, and making people think SS is a retirement plan when it's actually a welfare program. Combine that with the multitude of people working under the table, and qualifying for disability, and one can easily see that the country is getting more messed up by the day.

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