Inheritances v Cost of capital v #Children/woman

cells

CLAPTON wrote: »

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

When people dont have assets they need to dedicate time/money into acquiring those assets as they need them to live and improve their lot. This means they need to defer consumption today and put that time/money into building/buying assets they need. eg a home

When women had 6 children each that meant each generation had to do a lot of building/buying assets. When women have 1.5 children it means they wont need to build/buy assets it will be gifted to them.

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.

Yes I considered this, I did not want to further confuse people so I was going to post about it later. But since you bring it up I will add on this next post

cells

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.

Correct. The real £ value of assets in a world where women have 1.5 children will go down potentially towards zero. Imagine the UK continues at 1.5 children per women for a few generations and we get into a situation where there are fewer and fewer people each generation but the same number of homes or even an increasing number of homes.

Germany is already here or at the very edge of this change

So what happens is that homes become cheap, very cheap (German apartments have book values of ~40k euro for the big REITS). If the birth rate does not recover they will go towards worthless (even at 40k euro its close to 'worthless')

So the Pound/Euro/Dollar value of those assets will fall perhaps to 'worthless' levels. But on a fundamental need basis it still fulfills the ideas I am talking about

That is to say, with women having 1.5 children the children get free housing so they dont need to save/build. Back when women were having 6 children they had to save/build homes. Real rates of return should thus fall towards zero or negative

cells

Graham_Devon wrote: »

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.

What do you find to be wrong?

In its most fundamental state, when women have 6 children each the worlds population booms. When they have 1.5 children each the worlds population crashes. Each generation inherits the stock of capital of the previous generation so with 6 children wealth is diluted with 1.5 it is concentrated

With more people the world needs to build (aka save) more infrastructure. With fewer people the world does not need any anywhere near as much additional annual infrastructure


Clearly with a rapidly increasing population the needs for more infrastructure will mean high real rates of return. The high rate of return incentives the economy to produce capital goods rather than consumption. With a falling population the economy reverts to low or negative rates to incentivise consumption rather than capital goods (as the world is awash in capital goods)

Herzlos

Sure, the split of incoherence is now likely less than 1:1 parent:child, but as people live longer, money is inherited later and often skips a generation. By the time I'll inherit from my parents, I'll have paid off my house and be about to retire (hopefully), so the money will be largely useless to me, but my Son will be about the age where he might need help getting on the property ladder.

The idea that I won't need to worry about any savings because I'll get a chunk of money in my 60's is a bit silly, I'll have done all of my saving by that point.

Maybe we can get away without having to save for house deposits if our grandparents die at a convenient time, but I really doubt anyone is realistically planning based on that contingency.

Herzlos

cells wrote: »

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?

Banks will always lend at >0, so as long as the banks lending rate > the banks borrowing rate, they'll make money on it.

cells

Herzlos wrote: »

Sure, the split of incoherence is now likely less than 1:1 parent:child, but as people live longer, money is inherited later and often skips a generation. By the time I'll inherit from my parents, I'll have paid off my house and be about to retire (hopefully), so the money will be largely useless to me, but my Son will be about the age where he might need help getting on the property ladder.

The idea that I won't need to worry about any savings because I'll get a chunk of money in my 60's is a bit silly, I'll have done all of my saving by that point.

Maybe we can get away without having to save for house deposits if our grandparents die at a convenient time, but I really doubt anyone is realistically planning based on that contingency.

If you inherit assets you dont need, you lend them in the market to people who do need them.

With 1.5 children per woman, assets get concentrated (more assets per capita). With more assets per capital owned or lent the value they can extract decreases.

with 1.5 children per women, house prices and rents fall (and the prices and rents of other infrastructure). So even if individually a person wont inherit from their parents until later like, they actually do societal.


With 6 children per women each generation more or less needs to build their own homes. With 1.5 children per women, the next generation gets free housing. 1.5 children means each one gets 1.33 homes. They keep one and pass the 0.33 homes into the market. It does not take a lot of this additional 0.33 homes so that even those who do not inherit wealth get wealth in the form of below cost infrastructure

borkid

Surely we should be thinking of why people save. I saved more before I retired than I do now. I would still have needed to save because even if I had an inheritance coming I would need money at a particular time in my life not once I was 60 or later in life.
You might be able to argue that there was no need to save if the money was passed say to grandchildren or great grandchildren but passed to the next generation there is still a need to save.

The other thing you need to consider is if the inheritance is spent on holidays etc then there will be no assets to pass down to the next generation.

cells

borkid wrote: »

Surely we should be thinking of why people save. I saved more before I retired than I do now. I would still have needed to save because even if I had an inheritance coming I would need money at a particular time in my life not once I was 60 or later in life.
You might be able to argue that there was no need to save if the money was passed say to grandchildren or great grandchildren but passed to the next generation there is still a need to save

If you receive an inheritance, assets, and you dont need them yourself then you rent them out. You might receive a house but own your own so you rent it out, you might receive money but you dont need to spend that £100k so you rent it out (putting money in the bank is renting it out)

With 1.5 children per woman, either the assets go directly to those who need it (eg grand children in your example) so there is a much lower need to save by them. Or they go to people who dont need it and they rent it out pushing the real rate of return of this renting out of assets

The other thing you need to consider is if the inheritance is spent on holidays etc then there will be no assets to pass down to the next generation.

This would show up in the savings rate, if the older generation were really spending their income on holidays or care homes then the stock of wealth would not be increasing

cells

cells wrote: »

(putting money in the bank is renting it out)

That might be a better way of thinking about it

As the stock of capital increases and while women only have 1.5 children there is more and more capital to rent out and fewer and fewer people who need/want to rent it therefore the cost of renting the capital crashes towards zero

System

cells wrote: »

When women have 1.5 children as now the children get 1.33 homes each so they dont need to build their own homes.

Funny then that there is apparently a housing shortage, and people are desperately trying to save to buy one.