My post last night attracted a number of intelligent comments.? I want to expand on what I said.

1) The Baby Boomers are different that other US generations.? They are less provident, willing to sacrifice the future for the present.? Not only do they save less, but they raid existing savings to fund current needs.? They are also more prone to investment scams.? When will Boomers realize that the amount that they can expect from investments with safety is not much higher than what long Treasuries yield?

2) My comment from last night, “The US is bad off demographically, but most of the rest of the world is worse off.? The US has a problem because it has not been saving, but that is largely because much of the rest of the world is neo-mercantilist, and is subsidizing export industries, and the US buys.” needs more explanation.

• The US has its birth rate at replacement rate, which is unique among developed nations, and is largely due to the influence of Mormons, Muslims, Orthodox Jews, Evangelicals, recent immigrants (legal or not), and homeschoolers.? (Personal observation: even non-religious homeschoolers tend to have more kids on average.)
• The rest of the world is worse off — China’s demographic problem is huge, but at least they save to compensate for it.? Europe is not quite as bad off, but nothing kills fertility quite so well as peace, moderate prosperity (meaning well-off with two working, not one working) and a decline in religious faith.

3) From a reader:

Can you please reconcile these two seemingly conflicting statements:

“[Boomers] will need to labor longer, and they should do so” and “To the extent that this causes labor shortages, the US will see greater employment prospects for its people”

Sorry that I wrote it that way.? There will be a balancing act that occurs in the economy around 2025 — wealthy Boomers retire, poor Boomers continue work.? The relative size of each cohort will determine what the effect is on the economy as a whole.? Beyond that, there is a third factor, immigration.? The US is more friendly than most places to legal and illegal immigration.? That helps solve our demographic problems, but it insures that my children learn Spanish.? If wages rise too much, immigration (and offshoring) will rise as well.? (It is akin to wealthy retired Boomers saying to their children, “You don’t have to care for us, we’ve found people who will do it more cheaply.”

4) Another reader comment:

Jeremy Siegel (Stocks for the Long Run) offers a pretty thorough and generally optimistic take on the Baby Boomer retirement issue in his latest book “The Future for Investors.” At the risk of oversimplifying a complex analysis, Siegel’s bottom line is that while there are not enough younger generation Americans to absorb the Boomers stock and bond assets at current prices, investors in emerging countries, like China and India, will more than make up for that and will end up buying the Baby Boomer’s paper assets as the Boomers sell them off to fund their retirements. The upshot is that foreigners will end up owning a lot of our companies by the year 2050. A potential snag, says Siegel, is whether America will be willing to let this happen, or will pass laws or adopt polices to discourage the transfer of US assets to foreign countries. This remains to be seen, but he is optimistic. On the other hand, the implications for the typical Baby Boomer’s most important asset, his or her house, is rather dire, because homes can’t be sold as readily? to foreigners, for obvious reasons. Siegel doesn’t provide an answer for the housing market, which is outside the scope of a book on stock investing in any event.

There is the political question around how much US corporations we would allow to be owned by foreigners.? I don’t know where the breaking point is there, but the answer will have an impact on the value of the US dollar.? As for homes, if we slow down the growth of the housing stock, and condemn more of the existing housing stock, we will eventually solve the excess housing problem.? As it is now, we have foreigners speculating on the value of residential US real estate.

5) One final note that I omitted last night.? Medicare is the big issue here, and we will begin to feel it over the next five years.? At least one election in the next decade will have Medicare as its top issue.? The Social Security problem is one-quarter the size of the Medicare problem.? No wonder Bush, Jr. did not try to deal with Medicare, but made the problem worse by adding the drug benefit.

6) I don’t see the emerging markets getting rich enough, fast enough, to do the wealth exchange necessary for the developed world on favorable terms for the developed world.

That’s all for now.? More comments, send them on.