Econ 2133 1st Edition Lecture 12Outline of Last Lecture Began Section 3 of ClassPart I: Entitlements Outline of Current Lecture Recap of Worker/ Retiree RatioPopulation GrowthProblems with Social SecuritySocial Security versus Medicare & Medicaid Monetary PolicyTreasure & The FedCurrent LectureWorker 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 2050Population 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French Prime Minister raised mandatory retirement age from 60-62- Public was outraged but needed to be done, next PM repealed it though 2.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 (Mᶳ), 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 somehowRelationship 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 byIn order to have more dollar bills, had to get more goldDepths of Great Depression was prolonged because of gold