Stephen Monrad

In my last post, I said that there was no easy solution to the problem of paying for the baby boomer generation’s retirement. The current savings and investment mechanisms are going to fail when they are needed most.

While there are no easy solutions, there are things that baby boomers could do now that would make a difference. The trick is to stop thinking about savings in terms of money. Instead, think of savings in terms of physical things. What could the baby boomer generation do today that would make it easier for those who are working when the baby boomers  retire to produce the things the baby boomers  need? It isn’t enough to just hand over the current stock of housing and other traditional investment assets. More is needed.

Somehow the baby boomer generation needs to do today some of the work needed to produce the goods that they will consume when they retire. Baby boomers can’t produce and save many of the things they need. For example, eggs don’t keep well for twenty years. Farmers twenty years from now will have to raise chickens and provide the retired baby boomers with eggs. Some things do store well though. For example, baby boomers could stockpile iron and other base metals. They could then provide the base metals that are needed to manufacture the goods they need once they are retired.

They could also go a step further and provide a good proportion of the base metals that are needed by the whole economy. Much of the mining and smelting sector could then be shut down freeing up workers to produce the things that don’t store well.

The problem with this approach is that no interest is earned storing physical goods. In fact, there are costs to storing goods so the return is negative. While small losses on investments seem unpalatable now when people expect positive returns, it will seem much more attractive if the value of traditional investments collapses and doesn’t recover.