Of course they couldn’t take my deal. For starters, it would expose the SS fund as a Ponzi scheme. That’s why it’s called a thought experiment.
And you, my friend, are the one who is going off and dropping red herrings. I’m trying to explain that this is exactly what this thread is about, and you just went off on a strawman tangent about Obama and communism.
Look, as I said above, if you only want to call voluntary investments ‘Ponzi schemes’ and exactly-similarly-structured-but-forced-and-involuntary schemes something else, that’s fine with me. We’re calling the same rose a different name.
Strawman arguement - the key to a Ponzi scheme is fraudulent (Ponzi wasn’t actually investing in postal stamps/rates.) He lied.
If Ponzi had actually invested in postal rates, it wouldn’t have been fraudulent. heh - it would have been a non-Ponzi “Ponzi” scheme.
Ponzi schemes are fraudulent. Voluntary or involuntary is irrelevant.
ETA: T-Bills work similarly to other bonds, look here: Bond (finance) - Wikipedia
A couple of comments: First, a lot of things need fixing in this country (the US), and have needed it for a long time. Physical infrastructure that has been allowed to slide for generations, as well as essential social functions such as health care and education. It’s like being in business and the truck you need to make your living needs a transmission job. You just damn well borrow the money to have it done, if that’s what you need to do. For some key problems, to say that the market will take care of it is about like saying the brakes on your car will reline themselves, or a guitar will tune itself.
Second, I question this notion the “good life” we keep hearing about. It’s not as if the Americans commonly seen in popular movies, living in huge, solidly built houses on tree-shaded streets are anything like typical. Since about 1980 younger Americans coming up in the workforce have been struggling to do as well as their parents, and two incomes are required to attain the lifestyle that their fathers, alone, supported for their families when they were children. Younger people buy houses that are smaller, uglier, and farther out from the city than their parents’. Or they become lifelong renters. We do have better computers and TVs at least. And the Internet, of course. But are bigger TVs and better computers the things for which we supposedly selling out the generations to come?
Thank you for the never-ending stream of Wikipedia references. Yes, I am very familiar with how T-Bills work. I am trying to engage on a more fundamental level of understanding here about how wealth is created via investment, and value is stored over time. And how the SS system does neither.
And as for the ‘fraudulent’ claim, I would also argue that SS is fraudulent. That is, if the claim by the SS administration is that they will take of us at retirement, and provide a secure standard of living, by wisely investing our SS taxes in assets that will create and store value. Because that is impossible in its current form.
If SS is claiming something else I would be glad to retract or modify my above statement.
To defend that SS is not fraudulent by claiming that it is acting wholly within the boundaries of Congressionally-established laws gets awfully close to your ‘No True Scotsman’ fallacy. Which I enjoyed, by the way. Thanks for the reference.
Personally, I think the media “good life” has always been an illusion - or if there was a time of the “good life” is was brief.
I’m 42, and pretty much a child of the 1970s. My mother mostly stayed at home - working a series of off and on part time jobs. But we had one car for much of my childhood. We never took a vacation anywhere exciting until my senior year in high school. My parents didn’t need to pay cell phone bills or cable tv bills. And although we lived far away from my parent’s families - we never made a long distance call - my mother wrote letters. We ate a lot of hotdish, seldom went out to dinner, my mother cooked from scratch and gardened and canned to stretch the grocery budget. I wore a lot of hand me downs from my cousins. AND - by the standards of most of my friends - my family was pretty well off - we had a nice middle class home, all the kids had their own bedroom. I’ve lived my adult life being scared to death of losing my home because I remember the recession of the 1970s and friends who would suddenly disappear from school because they had to go move in with grandma.
My parents were children of the 1950s. My father’s friends in his 1950s suburban neighborhood ate oatmeal patties for dinner, and got chicken on Sundays - his family was considered well off because they had meat three times a week for dinner. My mother’s family had more meat in their diet - but it was mostly in the form of sausage, pigs feet, hocks - beef was a once a month thing, Sundays they had chicken. Neither set of my grandparents ever had more than one car. Much of my grandparents furniture had been through a generation already - none of it matched and the couch was 40 years old.
I think our increased standard of living has been driven by perceptions in the media and access to credit for a very long time. I also think that we become adults and leave the nest expecting to have the standard of living our parents built up over the 20+ years since they married and raised us.
When a government faces deficits that are rising too fast, they have three basic options: raise taxes, cut spending, or inflate the currency. History has a pretty clear lesson about which option our government will pick. They’ll choose to inflate the currency, because doing so doesn’t require any specific action from Congress. Congresscritters don’t want to return home to their districts after voting for tax hikes or spending cuts. Allowing inflation to occur is the least painful option, from their perspective.
So we’re going to have inflation. The question is, how much. Nobody can really know that, but we can reasonably guess that it will be worse than anything we’ve seen before. The 1970’s did not feature hyperinflation; they featured your ordinary, garden-variety inflation. But in the future we will see hyperinflation because the deficits that the federal government faces are simply too massive. And if you don’t believe that can cause hideous economic suffering for a long time, my recommendation would be to read up on the history of Argentina. Japan had a lost decade, but Argentina has had more like a lost century due to generations of bad economic policy.
I’ve been thinking about this quite a bit prior to this thread, and those were the only long term solutions I was able to come up with, as well.
I can’t imagine any politician, from either party, getting elected while preaching lower spending and higher taxes. To inflate our way out seems the most likely action the government will pursue.
It seems like simple math. Is there another solution?
All these semantics on ‘Ponzi’. I just used that as a close example. I would say Pyramid scheme too. Might even say Local Nigerian Scam. Either way, it’s a system where you pay now, don’t ask questions, and “hope” it is available to you later. The only difference is that you are forced into this scheme, however you want to define it.
It’s called making a contribution to the general welfare of society, instead of acting like a sociopath. We all pay for services we don’t use and others do; and they are in turn paying for services THEY don’t use and we do.
I don’t know if this is an option if the U.S. wants to keep the dollar pegged to oil or maintain a dollar reserve currency. A collapse of the dollar would be catastrophic right now.
You have to wonder if there was ever any intention to pay off foreign debt. Had the U.S. kept the dollar strong and consumption high, maybe the global trade arrangement would have continued for a long time. But now the U.S. is in serious trouble. On top of huge government deficits and the national debt, there is the overwhelming amount of private debt.
Continue to borrow while we can and build a radically different economy. I am not too hopeful considering the lack of political agreement to solve anything.
That’s true if the spending is permanent. During WW II the debt rose to twice the GDP, much higher than it is now, and there were no long term ill effects. The prosperity of the '50s paid it off. But Ike, being that old style Republican who was more a Commie than the upright ones of today, actually believed in fiscal responsibility.
What happens if we don’t do anything? Tax revenues will fall from the depressed economy, we’d either have to pay more for social welfare - unemployment, food stamps, etc., or face riots and Hoovervilles. The debt would actually get worse, longer, than it will with a short and powerful stimulus package, especially of the stimulus addresses real needs.
I agree with you. 4 years ago, when we had the chance, SS should have invested in something far safer and wealth creating than T-bills - Lehman stock, for example. What could go wrong?
We had this discussion 4 years ago. Even when Bush was popular, the American people saw through this anti SS crap. Back then we heard that the stock market was safe, that it went up over every ten year period. How is that working out?
What did they see on the other side? You know, once they saw through it?
Why don’t we just let everyone take their 15% deduction and invest it as they see fit? The default could be T-Bills, unless they opt-out. That way they would be getting exactly what they are getting today. And they would have personal claim to the assets.
If they opt-out, they can invest it in whatever asset they want. If they want to invest it in Lehman stock, they can do so. Actually, they can’t. Because it doesn’t exist anymore. But they could invest it in whatever else they want.
