Most people have negative savings every year. They have more debt. If one has bought a house, then it is very easy to go into more debt every year, when house prices are rising. Then they fall.
Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies.
I mean, is it a good thing that one can get a "Rocket Mortgage" where you can "Get Approved Fast. Get an approval to buy a home or refinance your mortgage in minutes."? [1]
I suppose shrimp and pork and beef are also unquestionably evil... Debt didn't historically work because property rights were poorly recorded. This meant enforcing one's debt involved mafia tactics. Modern debt is cleaner and subject to bankruptcy, a process that occurs on a case-by-case basis when it's needed, a far better solution than randomly cancelling debt every so many years.
For example, businesses often need to borrow money in order to get started.
For another, "bridge" loans and "revolving lines of credit" allow a business to operate when the timing of receiving payments does not line up with the timing of when bills are due.
Forgiving debts means that interest rates must rise to cover those losses.
The figures mentioned use full salary, in reality you might get some 50% of that possible to allocate to paying off the debt. You still get to pay utilities, cost of life for the family, transportation, education and probably extras. Note I've even ignored any savings - and with high mortgage debt, you can be wiped out by any more expensive health problem.
Interest based credit is important for capitalism (use money to make more money), but certainly not for market economies (Use money as a tool to exchange goods you want/need). Both are distinct and can exist independently.
In the end it was basically just a workaround that was effectively the same as charging interest and that same Muslim family ended up taking a conventional loan when they moved instead of an "Islamic-compliant" mortgage because it was a lot easier.
[1] http://www.npr.org/sections/money/2016/05/13/477956675/episo...
Exactly. Interests rates are way too low at the moment.
Pensions are a Ponzi scheme, don't fall for it.
Pensions are mostly just highly tax advantaged wrappers for investments now. They are most definitely not ponzi schemes.
Your link is for a defined benefit pension, which is not typical anymore.
The problem is they bump up those benefits when their fund is doing well but when it isn't doing well there's little or no adjustment. It's so big it's fund is influential in the market and also in politics.
Large numbers of current retirees have been promised unaffordable pensions.
While public pensions like social security have certain features of a Ponzi scheme, they can be sustainable forever, unlike other Ponzi schemes. In fact, they can be more efficient than everyone saving and investing for retirement themselves: https://www.economist.com/news/economics-brief/21727877-fina...
Consider if you have a 5% chance to die at or before 65 who get's the money? Well what if you could get together with 10,000 people and split it with those who live. Now your investments are boosted by those who die and there is no downside as who cares what happens after you die.
Unfortunately, such schemes are illegal unless it's though a company. Because really the long tail is living to 120 which means you don't want to aim to be broke at say 95 then turn 95 and be in good health.
PS: Remember, returns after inflation can be <3% over 20 years. I want a hedge for that risk other than just having a massive amount of money I can't really spend.
However, social security and other government funded pensions are Ponzi schemes. The money you pay in is given to people who are retired at that time. The money you get out is paid by people who are working at that time.
So the real fight is what proportion of current output goes to old people. Private schemes try to ensure wealthy old people get the biggest slice. Public schemes are more vote driven. It doesn't make them Ponzi schemes.
It's also not just a pension fund as you can receive benefits well before 62. Death of spouse with under age children or permanent disability.
Now, this does not mean it's a great or even a good investment. But, the trade off of safety vs returns is not actually that bad assuming you live longer than average.
PS: Another way of looking at it is there are no 100% safe approaches to investing 10's of trillions of dollars. Your stuck leveraging GDP growth which is only slightly better than inflation and frankly that's what SS does.
Most pensions also will not be enough to cover long term care costs if you are unlucky enough to get some form of dementia.
Pensions as a concept were a great idea when life expectancy was shorter and most people could mostly look after themselves in old age.
I don't think they can survive large numbers of people living until 90 -100 with dementia and needing 24h care. Lets hope the Ai/robotics gamble pays out.
I read a great article at some point that advised people who wanted to be writers to just go do that while they were young and poor and not wait until they had saved up money to finance it. Because the reality is that once you have the fancy high paid job and the fancy house, car and clothes that not only go with it but are essentially required, the amount you thought you needed changes.
For certain jobs, expensive suits and other things you might think are frivolous luxuries are nearly impossible to do your job without. It can be nigh impossible to unhook your income from this treadmill where the faster you run, the further behind you fall in certain metrics.
Millionaires are sometimes like the guy who needed the cart to carry cart repair supplies: Once you are rich and famous, now you need that mansion, not for the space or prestige but for security purposes, and you may also need a bodyguard, a bullet proof limo, etc.
Does someone who makes bad choices deserve to be homeless and destitute later in life?
The rest of us don't deserve to pay for their bad choices.
It seems valuable to society to not have old, homeless people causing trouble. But that's just me.
Personally, I think people should pay the price for their stupidity. Subsidizing stupidity never works out in the end.
Ultimately, saying neither of these is worth spending communal government revenues on collapses down to "I'm okay with people dying on the street."
Which is not offered as a straw man, but because that's a very possible outcome. And given that, if we're not okay with that, then we're going to spend significant resources to keep that from happening (ER care, homeless programs).
Social security attempts to invest that earlier in a person's life, so that the money treating more dire circumstances can be saved.
... And also allows for some measure of human dignity for those who might not have been taught about compound interest at age 6.