2012 Elections

[hblask 1]

Hows that "worst decade ever" for stocks working out for you?http://www.ritholtz.com/blog/2009/12/stock...rst-decade-ever

Wonderfully, thanks. Anyone who started work in 1971, putting 12% of their salary into the market every couple weeks and leaving it there until now, and withdrawing it starting now over the next 30 years or so will be way, way, way ahead of the "returns" on SS. We're talking orders of magnitude.When your program is worse than the worst market period ever, you're pretty much a criminal.But hey derp derp govt protects me derp derp.

[hblask 1]

Here's a link from Cato complaining about various "inequities", but admitting that the rate of return has been pretty good. Of course future returns won't be as good,

Gee, that sound like a scheme where someone promises large returns but doesn't invest the money, then starts running out of new investors to prop up the artificially inflated returns of the early adopters. If only there was a name for that.

but future returns in everything will be worse since the stock/bond market and our economy are going to be severely affected by globalization/peak oil/resource/debt problems.

For all the people whose work career started in 2005, put all their money in retirement on the first day, and withdrew it all right now, that will be a serious problem. How about we create a special program for those people and let the rest of us earn market returns? Deal?

[BaseJester 1]

What he was saying was that SS started out with people getting more than they paid in. In a couple decades this aspect of SS will end. But that doesn't even remotely mean that SS will end, just that in a couple decades you won't be able to call it a ponzi scheme by any reasonable definition. The future potential insolvency of SS is wildly exaggerated. With minor tax/benefit adjustments it would remain solvent indefinitely. According to this article, even long into the future unadjusted SS is only projected to run deficits of a couple hundred billion. That is trivial compared to how much we waste on the military or on excess medical expenditures. But even if you did think that was too much of a deficit, it would be very easy to close.

Typically in a ponzi scheme the perpetrator doesn't just keep the money for awhile and return it without interest. He blows it on hookers and cocaine.The United States' hookers and cocaine are the military industrial complex, foreign adventures, corporate welfare, and unfunded social programs. Yes, supposing the government doesn't squander the money, it would be hypothetically possible to return that money later. That's true of any ponzi scheme.

[LongLiveYorke 38]

Politicians.But that's not really a defining feature of Ponzi schemes anyway, so that's an odd question.Ponzi scheme:1. Sold as an 'investment'2. No actual investing taking place3. Current returns paid for by new investors4. Promises of impossible rates of returnHmmm.... actually, SS fits all four of those. In this case, the promises in #4 are insanely low, but still impossible.

No, it obviously fails 1. Calling SS an investment plan is a pretty effective strawman employed by some conservatives, because then they can say, "I could get a better investment myself doing blah blah blah..."It's not an investment plan, it's an insurance policy. It's insurance for injury, unemployment, and retirement.To call SS a ponzi scheme is to call insurance policies a ponzi scheme: you pay a little money continuously, your returns (if you get them) are fed by other people taking part in the scheme, and you most likely take out less than you put in.

[mrdannyg 274]

No, it obviously fails 1. Calling SS an investment plan is a pretty effective strawman employed by some conservatives, because then they can say, "I could get a better investment myself doing blah blah blah..."It's not an investment plan, it's an insurance policy. It's insurance for injury, unemployment, and retirement.To call SS a ponzi scheme is to call insurance policies a ponzi scheme: you pay a little money continuously, your returns (if you get them) are fed by other people taking part in the scheme, and you most likely take out less than you put in.

I'm glad someone addressed that. I just couldn't decide how to address something so completely wrong. It really doesn't meet any of the qualifications. It does what it is 'advertised' as doing, which makes either #1 or #2 false, depending on your interpretation. It currently does meet #3, but that is not how it is intended - contrary to ponzi schemes, which are intended to work that way. #3 can only be true if #1 and #2 are both true.#4 is just silly to apply to SS. People don't pay into SS in hopes of gaining returns that are larger than they should reasonably expect. For people who were putting money in that the right time, that's what they got...but that wasn't their intention.

[Dread Aidan 8]

#4 is just silly to apply to SS. People don't pay into SS in hopes of gaining returns that are larger than they should reasonably expect. For people who were putting money in that the right time, that's what they got...but that wasn't their intention.

I don't really have any intentions when I put money into SS. I think that's mostly because it's taken right out of my paycheck and I never see it and I don't really have any say in the matter. The only time I think about social security is when I get that letter in the mail that says this is how much I'll get when I retire and I feel sad.

It's not an investment plan, it's an insurance policy. It's insurance for injury, unemployment, and retirement.

I thought the Federal Unemployment Tax was insurance for unemployment. And my state disability tax was insurance for injury. And what does it even mean to say it's insurance for retirement? Like, just in case I happen to live long enough to retire? Isn't insurance a protection against uncertainty? Should we really view retirement as an uncertainty? (Maybe, I haven't really thought about that. Maybe we should have the view that we should all work until we die.)

[vbnautilus 48]

I thought the Federal Unemployment Tax was insurance for unemployment. And my state disability tax was insurance for injury. And what does it even mean to say it's insurance for retirement? Like, just in case I happen to live long enough to retire? Isn't insurance a protection against uncertainty? Should we really view retirement as an uncertainty? (Maybe, I haven't really thought about that. Maybe we should have the view that we should all work until we die.)

The main difference between a regular investment and insurance as I see it is that the investment is your property. Insurance only pays you if certain conditions are met. You can't sell your SS to someone like you can sell your other investments. You can't get your money out early if you decide to (unless you become disabled). Uncertainty is not really a requirement, although it is probably unprofitable to sell insurance for things that are relatively certain. That said, retirement is not a certainty. Neither is reaching age 65. The other key difference between a ponzi scheme and this, is that you are not being tricked. Everyone knows (or can know) how the system works. The main goal of the ponzi scheme is to fool the investors into thinking their money will be invested when in actually it will not be. People putting their money into a ponzi scheme believe they can take it out at any time. This is why the term is so appealing rhetorically to politicians; they are implying that there is a sleazy scam going on. Even if SS is not economically viable, there is no scam; it is sold as insurance not as investment.

[Balloon guy 158]

The main difference between a regular investment and insurance as I see it is that the investment is your property. Insurance only pays you if certain conditions are met. You can't sell your SS to someone like you can sell your other investments. You can't get your money out early if you decide to (unless you become disabled). Uncertainty is not really a requirement, although it is probably unprofitable to sell insurance for things that are relatively certain. That said, retirement is not a certainty. Neither is reaching age 65. The other key difference between a ponzi scheme and this, is that you are not being tricked. Everyone knows (or can know) how the system works. The main goal of the ponzi scheme is to fool the investors into thinking their money will be invested when in actually it will not be. People putting their money into a ponzi scheme believe they can take it out at any time. This is why the term is so appealing rhetorically to politicians; they are implying that there is a sleazy scam going on. Even if SS is not economically viable, there is no scam; it is sold as insurance not as investment.

So Milkins was a ponzi scheme, and Bakker was an insurance policy?

[Dread Aidan 8]

I don't really care about whether it's a Ponzi scheme or not. I feel like that's kind of beside the point. The point being does it do what it should do and is there a better way for it to do it?

The main difference between a regular investment and insurance as I see it is that the investment is your property. Insurance only pays you if certain conditions are met. You can't sell your SS to someone like you can sell your other investments. You can't get your money out early if you decide to (unless you become disabled). Uncertainty is not really a requirement, although it is probably unprofitable to sell insurance for things that are relatively certain. That said, retirement is not a certainty. Neither is reaching age 65.

I think we're splitting hairs on the certainty aspect. Nothing is certain. (Except death and taxes?) So let's take that out of the equation. Isn't insurance protection against a possible negative event? Is retirement a negative event or is it a goal in life? Again, this might be up for debate. Maybe retirement should be viewed as a luxury and the expectation is that you will work until you can't work anymore. If we view retirement as a luxury, then planning for that retirement should be done by saving and investing and buying lottery tickets (that's how you guys are planning for it, right? Lottery tickets?). I don't see any problem with the government offering social security as an option. But if I want to take that money and put it into a different retirement plan, why can't I do that? If it's not clear yet, I'm totally talking out of my ass. Like I said, I only think about social security once a year. But just the very idea of it seems a bit incongruous to me.

[El Guapo 8]

It is not traditional insurance. The disability part is permanent disability, not state disability if you break your leg and can't work construction for 6 months.SS is like a pension. It's a defined benefit plan, and like other defined benefit plans (United Airlines) the principle has been utilized for other things. If the treated SS like CalPERS or another large pension plan like that, they would have enough money to fund it for generations. But as of now, the only investment vehicle SS can use is US treasuries. If there was a change to the structure of the plan two major things would happen.1.) Treasuries would lose a major purchasing entity, or at least part of it would. This would initially negatively impact treasuries.2.) Trillions of dollars would go into equity and other fixed income markets. This would initially cause a dramatic uptick in what ever markets they went into. The question is whether that uptick would be sustainable, or if it would create it's own sort of bubble.I would assume if they implemented some pension hybrid, that it would be done over an extended period of time. As not not dramatically sway markets.

[mrdannyg 274]

Next QE: US government amends SS legislation to say they are allowed to invest in equities and other options. They don't even have to put any actual dollars "at risk", and can keep it all in treasures. The markets initial reaction to the future potential of trillions of influx (as per Guapo) will cause a run on prices as everyone tries to get in early.Right?

[Balloon guy 158]

Can we all agree that if SS is not available for every person who has paid into it ad infinitum, that it will in fact then be a confirmed ponzi scheme?

[Balloon guy 158]

Next QE: US government amends SS legislation to say they are allowed to invest in equities and other options. They don't even have to put any actual dollars "at risk", and can keep it all in treasures. The markets initial reaction to the future potential of trillions of influx (as per Guapo) will cause a run on prices as everyone tries to get in early.Right?

Depends on T-bill rates

[vbnautilus 48]

I don't really care about whether it's a Ponzi scheme or not. I feel like that's kind of beside the point. The point being does it do what it should do and is there a better way for it to do it?

Well I only got into this because I thought it was dishonest for the politicians to be calling it a Ponzi scheme. I don't really care if there's a better way to do it.

I think we're splitting hairs on the certainty aspect. Nothing is certain. (Except death and taxes?) So let's take that out of the equation. Isn't insurance protection against a possible negative event? Is retirement a negative event or is it a goal in life? Again, this might be up for debate. Maybe retirement should be viewed as a luxury and the expectation is that you will work until you can't work anymore.

From an economic perspective it is a negative event since its the loss of your income. That is why you insure against it.

If we view retirement as a luxury, then planning for that retirement should be done by saving and investing and buying lottery tickets (that's how you guys are planning for it, right? Lottery tickets?). I don't see any problem with the government offering social security as an option. But if I want to take that money and put it into a different retirement plan, why can't I do that? If it's not clear yet, I'm totally talking out of my ass. Like I said, I only think about social security once a year. But just the very idea of it seems a bit incongruous to me.

Your ass is now arguing that SS should not be mandatory. I have no problem with that.

[Dread Aidan 8]

From an economic perspective it is a negative event since its the loss of your income. That is why you insure against it.

Come on, I don't have to work anymore. That's totally positive! No work! Huzzah!

Your ass is now arguing that SS should not be mandatory. I have no problem with that.

My mind says Republican, but my ass says Democrat.Put that on a bumper sticker.Obligatory note: I'm not a Republican and you're not a Democrat.

[vbnautilus 48]

Come on, I don't have to work anymore. That's totally positive! No work! Huzzah!

Well in that case,

[Roll the Bones 74]

Can we all agree that if SS is not available for every person who has paid into it ad infinitum, that it will in fact then be a confirmed ponzi scheme?

But it just occured to me that this would be a good argument in the Supreme Court in defense of requiring Americans to purchase health insurance if SS is in fact insurance.

[hblask 1]

It's not an investment plan, it's an insurance policy.

Now that it has failed as an investment program, the supporters have changed their tune. Nobody would've ever supported the notion of paying 12% of your income for "insurance".In other words, I'm calling BS.

[mrdannyg 274]

Now that it has failed as an investment program, the supporters have changed their tune. Nobody would've ever supported the notion of paying 12% of your income for "insurance".In other words, I'm calling BS.

Strong move, calling BS on your own strawman.Also, do you guys really pay 12% of your income to SS? Because that is...a lot.

[hblask 1]

I don't really care about whether it's a Ponzi scheme or not. I feel like that's kind of beside the point. The point being does it do what it should do and is there a better way for it to do it?

Yeah, this really is the central point. The Ponzi scheme discussion is used as a shorthand to bring up a number of objections to the program and because the match is pretty good, although not perfect. But the name doesn't matter; it still sucks and is harming the country.

[hblask 1]

Strong move, calling BS on your own strawman.Also, do you guys really pay 12% of your income to SS? Because that is...a lot.

?? I'm calling BS on the notion that it is "insurance". It has never been sold as insurance until it became so glaringly obvious that it was a failure as a retirement program. It's a shameless redefinition necessitated by reality.Yeah, between employee and employer contributions, it's over 12%.3% invested in equities would give a higher monthly payout indefinitely for something like 98% of all workers.

[mrdannyg 274]

Yeah, this really is the central point. The Ponzi scheme discussion is used as a shorthand to bring up a number of objections to the program and because the match is pretty good, although not perfect. But the name doesn't matter; it still sucks and is harming the country.

As agreed by everyone but you, it is a terrible match. Not even close, and it is an even more terrible shorthand.The program may suck, but insulting it poorly and disingenuously doesn't help the discussion.

?? I'm calling BS on the notion that it is "insurance". It has never been sold as insurance until it became so glaringly obvious that it was a failure as a retirement program. It's a shameless redefinition necessitated by reality.Yeah, between employee and employer contributions, it's over 12%.3% invested in equities would give a higher monthly payout indefinitely for something like 98% of all workers.

It was pretty clearly closer to insurance than an investment, even if returns were previously overestimated.You said 12% came out of your paycheck, so I assumed you meant employee contributions. I know what you meant, though that isn't precisely the same thing.

[vbnautilus 48]

?? I'm calling BS on the notion that it is "insurance". It has never been sold as insurance until it became so glaringly obvious that it was a failure as a retirement program. It's a shameless redefinition necessitated by reality.Yeah, between employee and employer contributions, it's over 12%.3% invested in equities would give a higher monthly payout indefinitely for something like 98% of all workers.

Except that the name of the program when it was started was the Old-Age, Survivors, and Disability Insurance Program.It was sold as insurance from the get-go.

[Balloon guy 158]

Except that the name of the program when it was started was the Old-Age, Survivors, and Disability Insurance Program.It was sold as insurance from the get-go.

And they charged <2% of an employees check

[akoff 0]

Except that the name of the program when it was started was the Old-Age, Survivors, and Disability Insurance Program.It was sold as insurance from the get-go.

And they charged <2% of an employees check

This from the same people who are going to bring us health care...we really are ****ed.