Tuesday, January 6, 2009

Ben Franklin-4

"I read Justin Fox's article with horror [Dec.,15]. The basic premise: a government-run pension is more secure than my 401(k). Curiously, I saw no mention of a current government program called Social Security--one the government has handled so expertly I probably will never get to collect from it", Charles Ravenswaay (CR) letter to Time, 29 December 2008.

"The government cannot guarantee a 3% return over inflation. And we already have a national pension system called Social Security, which is going bankrupt. ... You would better serve your readers by educating them to these realities rather than indoctrinating them with the obfuscations of self-serving Democratic politicians", my emphasis, Thomas Maskell (TM) letter to Time, 29 December 2008.

That's it CR. Kick Fox for me too!

Attaboy TM, "obfuscation of self-serving Democratic politicians".


Anonymous said...

It must look like institutional madness to accountants when they look at the nations balance sheet...

We've given 535 local leaders the role of managing the largest corporation/nonprofit on earth...

Treas/Fed/Congress/OMan = giant madness... and growing...

Anonymous said...

«The government cannot guarantee a 3% return over inflation.»

Of course it can: if GDP grows at a real rate of 3%, taxes will also grow at that real rate.

What cannot grow at real 3% is money invested in the stock market, even if GDP grows at 3%, because A) it cannot grow faster than GDP *in the aggregate*, B) money invested in the stock market gets eaten by costs that make Wall Street rich.

«And we already have a national pension system called Social Security,»

As the name says, it is not a pension system, it is an insurance system. The full name is OASDI, Old Age, Sickness Disability, Insurance.

The idea is that if for whatever reason you end up poor, because of age, long term illness or becoming disabled, you can rely on some minimal fallback.

Even ex-billionaries can rely on OASDI.

«which is going bankrupt.»

That's ridiculous -- OASDI benefits are inflation indexed, not GDP-indexed, so if GDP grows it is fairly easy to fund them.

Things like 401Ks are good only for insiders (those that make a lot of money off stockbroking fees) and existing holders of stocks, who get to dump them at high price to masses of unsophisticated investors.

If a lot of people, and even in much the same age groups. have 401Ks, investment becomes too correlated (when they buy to save, all buy, when they sell because of impending retirement, they all sell), and anyhow stock markets returns are exceptionally volatile on a 20 year time frame.