Pensions or a cruise?

A columnist for The Economist says people should ensure their pensions are adequate before they think of a world cruise.  I think the world cruise should come as soon as possible and worry about the gas bill later.

It could be that we have conflicting conflicts of interest in these recommendations.  One of my stepsons and his wife are entertainers on a cruise ship and the columnist probably has friends in the investment industry and gets some of his income from advertising and subscriptions from the industry.  You can read the column here.

Retirement is important for a lot of people.  A few years ago it was fashionable to plan for retirement at the age of 40 or 50.  Now that columnist is suggesting people may have to work beyond normal retirement age in order to have the lifestyle they desire.

Retirement planning is easy when the economy is growing and everyone believes that growth will continue.  But when growth ends all those plans and savings are likely to fall apart.  There are three things that can happen to savings and retirement funds:  inflation can wipe out their value, firms can fail or governments can decide to give haircuts.  It is not clear that there will soon be a return to economic growth.  Given the current economic uncertainty, any one of these could happen at any time.

The columnist suggested that inflation-linked government bonds  “should be the building blocks  of a pension portfolio.”  This ignores that most governments are carrying more debt than they will ever be able to repay.  When the Ponzi scheme explodes a lot of people will find their dreams destroyed.

In the meantime, those in the investment industry are doing short-term well out of all those people worried about their retirement income.

So far the economic crisis has mostly hurt young people.  If or when it hits older people and they can no longer afford cruises the cruise industry will have a surplus of ships.  They may then have lots of work for an Italian cruise captain with some experience at decommissioning ships.  I encourage people to take a cruise before he gets called back to work.

Here’s a Irving Berlin/Fred Astaire song from 1936: “Let’s face the music and dance”  or cruise.

Regulating the cruise industry

Last week’s floating stool ship has put a little focus on the cruise ship industry and brought forth some suggestions the industry requires more regulation.

It appears that by cruising between international ports the industry has avoided coming under the jurisdiction of any one government.  It also appears to be a highly competitive industry and one that is prospering.  Maybe there is a lesson here about competition and government interference.

johnny_automatic_ocean_linerI have a theory that at the request of business governments pass laws to restrict competition in the belief that there will be greater profits if there is less competition.  Then to control the excesses of monopoly they introduce regulations.    If this is correct an industry in which competition is not restricted has no need for regulations.

It seems to me the cruise ship industry is regulated by its customers.  It is highly competitive and depends very much on returning customers.  These guys have to look after their customers.  If there develops a perception that the Carnival Triumph passengers are not being treated fairly or that ships are not being properly maintained,  the whole industry will probably pay for it.

Employees may not be in such a strong position.  Wages tend to be a function of supply and demand and the cruise companies draw their unskilled employees from the world market.  The companies benefit from world over population.  So  do the passengers whose fare would be quite a bit higher if the ships had to pay all their employees North American wages.  Employees also benefit from higher wages than they would get at home.

We have to note that a lot of companies in North America (and their customers) also benefit from the low wages that go with high unemployment.

One way to deal with the exploitation of labor would be some sort of guaranteed annual income which would make it a little less necessary for workers to accept poor pay or working conditions.

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