Inheritances v Cost of capital v #Children/woman

cells

Typing out loud....

Theory: As each generation in the UK now receives in the region of £8.8 trillion* (my guess was £6 trillion) in gifted/inherited capital and now that women only typically have 1.8 children we have entered an age where youngsters don't need to save not with £8.8 trillion heading their way. The economy is responding by pushing real rates down to zero or even negative.


Factors to consider:

When children per women was over 2 it meant the wealth passed down generations would be shared requiring the next generation to save to fill the difference. With children per women below 2 its the opposite each generation gets more than the last.

In developed countries children per woman has been below 2 for some time (since about the mid 1970s) however this was offset by increasing life expectancy which explains somewhat why we did not go to lower rates sooner

With womens increasing age of first child, decreasing number of children and a much more slowly increasing life expectancy all colliding together we have seen a huge swing towards not needing to save



*https://www.theguardian.com/business/2016/aug/18/ons-data-shows-uk-wealth-wedded-to-property

CLAPTON

cells wrote: »

Typing out loud....

Theory: As each generation in the UK now receives in the region of £8.8 trillion* (my guess was £6 trillion) in gifted/inherited capital and now that women only typically have 1.8 children we have entered an age where youngsters don't need to save not with £8.8 trillion heading their way. The economy is responding by pushing real rates down to zero or even negative.


Factors to consider:

When children per women was over 2 it meant the wealth passed down generations would be shared requiring the next generation to save to fill the difference. With children per women below 2 its the opposite each generation gets more than the last.

In developed countries children per woman has been below 2 for some time (since about the mid 1970s) however this was offset by increasing life expectancy which explains somewhat why we did not go to lower rates sooner

With womens increasing age of first child, decreasing number of children and a much more slowly increasing life expectancy all colliding together we have seen a huge swing towards not needing to save



*https://www.theguardian.com/business/2016/aug/18/ons-data-shows-uk-wealth-wedded-to-property

complete nonsense (although superbly argued) as you don't understand the value of money or of assets.

cells

CLAPTON wrote: »

complete nonsense (although superbly argued) as you don't understand the value of money or of assets.

you often make these posts which say absolutely nothing, do you just like hearing your own voice? Have a discussion. What do you feel is wrong/correct and why


Again just thinking out loud:

Pre 1900: Savings were low as people could just about feed and cloth themselves. Any savings that were gathered together would be split down towards say 6 children so the next generation would only get 1/3rd of anything saved and that was not a lot

Pre 1950: Savings increase but are still low by modern standards as life is still expensive. Any savings are spilt down towards 3 children so the next generation gets some but its diluted 3 ways. of course two world wars also cause a lot of damage to savings and wealth

Post 2000: Savings are much easier to make as food and essentials like cloths go from a huge chunk of peoples earnings to much smaller portions. That what is saved is passed down to 1.5 children so the next generation not only gets a good chunk of saved/inherited wealth but it is concentrated from 2 to 1.5 ways


The need to save an invest therefore falls pretty much continuously to the point now where the next generation in the UK will inherit £8.8 trillion from the last.

With so much gifted and inherited capital there is much less of a need to save so rates go to zero

stueyhants

The people passing down money now are enjoying reasonable state pensions and often good company final salaries pensions. This is not the case for the future generation so I would expect future generations to use more of their income plus any passed down to fund their old health. Individuals are also living longer and costing more in health and social care so whilst your argument has some logic I don't think it will be true in the long term.

mwpt

cells wrote: »

With so much gifted and inherited capital there is much less of a need to save so rates go to zero

How does this logic work? You are saying that we have more savings passed down which somehow translates into less need to save, which still translates into more savings passed down, and with less need to save that somehow means banks can reduce the incentive to save? Surely banks would be upping the incentive to save with higher rates if there is lower demand for savings accounts.

Graham_Devon

I just cannot understand how you come to some of the conclusions you do.

The more you type, the closer my jaw gets to the desk.

cells

The stock of savings has increased, which itself means there is less need for everyone to save. This stock of savings is further concentrated when women have fewer than 2 children on average.

You should think of savings primarily as infrastructure not notes in your pocket. Homes are the biggest stock of savings, followed by other buildings. Even a lot of the value in shares are 'buildings' of one type eg EDF and its huge stock of 'buildings' aka nukes plants

With this stock of savings increasing, and getting concentrated, there is less need (or no need) to save.


Think of it this way, when women had 6 children the children would only get 1/3rd of a house so would have to to build (save) their own homes. When women have 1.5 children as now the children get 1.33 homes each so they dont need to build their own homes.

CLAPTON

cells wrote: »

you often make these posts which say absolutely nothing, do you just like hearing your own voice? Have a discussion. What do you feel is wrong/correct and why

because I pay you the compliment by assuming that you understand the flaws in your posts: but maybe I am wrong and you don't .

anyway, in the future we consume goods and services and not assets.

the 'price' of our assets and of our money will be made out of future demand and supply and so your calculations are meaningless. Much of the wealth you add to your totals may be worth zero.

a £100 million pound Van Gogh may be priced the same as a loaf of bread if you are starving.

Out,_Vile_Jelly

Have you factored care home costs into this? This is what most wealth is going to be spent on in future.

cells

mwpt wrote: »

How does this logic work? You are saying that we have more savings passed down which somehow translates into less need to save,

Yes, if you inherit a house there is less need to save your income and you can spend more of it. When you die you can still pass this house on its not been spent

which still translates into more savings passed down,/QUOTE]

yes, as when women have <2 children what savings there are get concentrated

and with less need to save that somehow means banks can reduce the incentive to save?

banks dont dictate how much savings need to be made the stock of savings does that

Surely banks would be upping the incentive to save with higher rates if there is lower demand for savings accounts.

Why? more importantly, HOW?

If you take your £1m and hand it over to the Bank, they need to find someone who will take that £1m and put it somewhere where they can earn a positive return. If there is nowhere they can earn a positive return they wont borrow and if they dont borrow how are the banks going to offer you any interest but zero?

At the moment most bank deposits are funneled into BTL or to buy a house for an owner. Both return something due to rent or imputed rents.

Think long into the future, if women keep having 1.5 children what happens to rents and imputed rents?

cells

Out,_Vile_Jelly wrote: »

Have you factored care home costs into this? This is what most wealth is going to be spent on in future.

this applies to some people and people project it as normal

Most recent inheritance data shows £72 billion (in one year) was handed over from one generation to the next. This does not include gifts before death which I think will be on a similar order and its 2013 data so the figures are likely to be a lot higher today than then as house prices and stocks have recovered since 2013

Also the savings rate is still positive, not negative as would be implied by the older generations spending it on carehomes