Thursday, December 24, 2015

My Sorry Social Security Return

Moral: Wherein we look at a prevalent view.

The title of the post comes from an Op-Ed published by the WSJ, Moday, 12/21/2015. The Op-Ed was written by Jeremy Spiegel (a frequent contributor) of Wharton.

Now, in his opinion, Jeremy would rather have had the money that he and his employer put into the Social Security Fund under his control. Remember, Bush, the son, wanted this, too.

The following compares his numbers (US$) on retiring at 70 with the maximum payout (if he lives to 90) from Social Security.
    Soc Sec, 840K
    Stock index fund, 2, 270K
    U.S. Treasury bonds, 1,280K
We will ignore that the difference goes to support many others who have not been able to pay in, such as the disabled, etc.

But, there is another issue. The stock fund would have been using the magical multiplier in creating funny money. And, out of this type of bucket, not all who have ownership can extract to the full amount. Jeremy ought to know this. The current method favors the few.

Now, can this funny gaming change? Yes. Who is thinking along this line?

In regard to the U.S. Treasury approach, yes, this can work (see experience with Saving Bonds). But, bonds can change value, too, based upon the state of the current game.

Besides, how does Jeremy know that he could hold the bonds to maturity? Even if he could, how well could we expect the majority to do in this regard?

So, not picking on Jeremy, but there is a whole lot more to the issue than he allows for. But, then, considering the larger issues would detract from the message.

Since Jeremy is in finance, a professor, I would like to know what is the basis for the gaming that goes under the guise of financial engineering, albeit we already know that greed is one motivation.

Remarks:  Modified: 12/23/2015

12/23/2015 --

Thursday, December 17, 2015

Spigot opened, a little

Moral: Wherein we acknowledge the change.

Ah, so late. We looked for this back in 2010, then 2012, then ...

And, at various places, you see the rhetoric of the addicts who, unfortunately, get more attention.

Can savers breathe a sigh of relief? Not yet.

Remarks:  Modified: 12/17/2015

12/17/2015 --