Econ 2133 1st Edition Lecture 12 Outline of Last Lecture Began Section 3 of Class Part I Entitlements Outline of Current Lecture Recap of Worker Retiree Ratio Population Growth Problems with Social Security Social Security versus Medicare Medicaid Monetary Policy Treasure The Fed Current Lecture Worker to Retiree Ratio Recap 2030 34 retirees 100 working ages 19 64 2050 34 retirees 100 working ages 19 64 Good thing the number of retirees to working didn t rise at least Japanese will increase retirees to every 100 workers from 57 to 78 from 2030 to 2050 Europeans will increase retirees to every 100 workers from 46 to 60 from 2030 to 2050 Population growth In US Latinos have largest in 2050 they will make up majority of population Blacks make up 12 in 2030 and 2050 it is expected to remain at 12 In Europe Majority of population growth in Europe is from Muslims especially in France with 15 However US Muslim population is only 1 Problems with Social Security Recap 1 Increased Longevity wonderful but bad too a good problem without increasing eligibility age of social security People live longer retire and put burden on system so instead of system really only helping last 5 years of life it could even assist someone for the last 30 years of life Greek hair stylist can retire at 50 because it s a hazardous occupation hence why they re in so much debt Previous French Prime Minister raised mandatory retirement age from 60 62 Public was outraged but needed to be done next PM repealed it though 2 Lowering women to retiree ratio so we have rise in population or increase immigration More workers in population to offset number of retirees 3 Increased real inflation adjusted benefits every generation is promised more and more benefits Benefits now to August 14 000 yr Benefits in 2050 to August 20 000 yr in 2015 dollars These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute THAT S A 40 INCREASES Y ALL NOT OKAY In 2060 Scary to think about NEED to cut these promises of constantly increasing rates and just keep it the same comparatively By 2038 75 of taxes could go to paying peoples Social Security due to population of retirees and increased real inflation adjusted benefits However Social Security is predictable while Medicare and Medicaid aren t 5 of population is in nursing car currently 10 of population will be in nursing care in 2030 With a cost of 5 000 per person that s a lot of New Medical technology changes which changes cost of it due to new expensive technology that can and will save lives Medicare is the 1 good people feel everyone should have despite cost though Scarcity applies but overlooked Last 3 months of life and last 3 days of life are the most expensive because anything and everything is done to preserve life at all costs Problem no one knows what medical technology will be and the trouble is the range it could cost Nobody even wants to take Medicare or Medicaid patients though Only large hospitals can even make money on these patients because they pay 30 cents to the every dollar In England national healthcare only Government decides what they will and won t pay for Monetary Policy The fed using policy tools to affect bank reserves Monetary base Monetary supply M interest rates and other financial variable to counter cyclically reduce amplitude and periodicity of economic fluctuations Thereby stabilizing the business cycle Fiscal policy government spending and taxation Monetary policy works through financial markets Transmission mechanism Net Worth Assets what you own like stocks property etc liabilities what you owe like debts whatever you borrow etc Examples of Monetary Policy August 9th 2007 Bank Nationale Paris BNP suspended mortgage backed securities BNP refused to cash out investments not sure how much they would be worth September 15th 2009 US Treasury lends to Gadhafi in Libya US issued IOU s and had federal budget deficit needed money somehow Relationship between Treasure and the Fed When treasury borrows money fed lends it to them 800 Billion now tripled to 2 4 Trillion Fed owns 2 Trillion of houses due to housing market crash Who does surgery on surgeons where does your bank bank Mo monetary base currency and bank reserves Dollar bills are liabilities of the fed FIAT currencies currency has value because government says so Commodity standard until 1993 Could take 23 67 to get 1 ounce of gold because gold was the commodity the dollar was backed by In order to have more dollar bills had to get more gold Depths of Great Depression was prolonged because of gold standard