Social Security Discussion

[Toddsterpatriot]

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Right. We'd be decreasing SS payments over time.

The US Treasury would still have to issue and sell securities to cover the decreased revenues under the current monetary arrangement.

The employees purchasing TDFs and/or stocks would purchase them elsewhere, as opposed to the federal government, so all that occurs is that the stocks/investments simply change hands. There is no new $$$$ entering the economy.

The individuals who sold these investments to retirees would have the $$$$ from these sales which is the same $$$$ that purchases government bonds.

In a nutshell, at the end of the day, your privatization proposal prevents people from buying into SS, which again, is the functional equivalent of purchasing a government bond. They purchased TDFs, stocks, or whatever. And others sold their stocks and purchased new issue Treasuries. If we analyze this from a purely macroeconomic perspective, all that's occurred is some stock and bonds have changed hands so to speak. Total net outstanding bonds and stocks, and if we consider SS a bond, are still roughly the same. This has no beneficial effects for total net savings except for generating commissions and transactional costs.

I like my plan better, so would 99.99% of Americans.

The employees purchasing TDFs and/or stocks would purchase them elsewhere, as opposed to the federal government, so all that occurs is that the stocks/investments simply change hands. There is no new $$$$ entering the economy.

More money buying stocks, less money buying US Treasuries.
More money in the control of the people, less money in control of the government.
More people with higher returns, returns not dependent on government promises.

I like my plan better,

My plan doesn't lead to more government control of the economy.
I like my plan better.

so would 99.99% of Americans.

Just the ones who are bad at math. Not 99.99% of Americans. Maybe 99.99% of liberals?

Privatization in no way, shape, or form alters the compositional amount of total shares of stock, which people would hold for investment. Again, if we look at this through a macroeconomic lense, it's not a case of the American public being able to invest better than government.

You seem driven more by an ideological bias than anything else. You seem intent on promoting this nonsense and it's not even economically efficient.

Over the long-term, bonds and stocks do indeed measure the growth of the economy. The problem with private ownership of these instruments is that they don't grow in a linear fashion.

If one group of people retire, they may do very good compared to the normal rate of return, but another group may not be so lucky. Either way, the government sector will have to spend $$$$ on social welfare at the federal, state, and local levels. If it got really bad, the government would have literally prevent widespread poverty through extraordinary measures.

Privatization of SS is horrible idea. The people pushing it remind of the geniuses who swore up and down housing prices would increase indefinitely. That worked out really well.

As Oldfart and myself have repeated pointed out, the only thing left in this scenario are transactional costs, which are a subsidy for the financial factor.

My plan takes economic efficiency into account. We eliminate FICA and make SS payments $2,000 per month (starting minimum, funded right out of the general revenue) with COLA increases. This will give people more spending power, which translates into demand for more real goods and services. This increases aggregate demand, thus putting more $$$$ into the economy.

Lastly, as opposed to some of the self-proclaimed economic geniuses on this message board, I can assure I understand math better than all of them combined. Whether it's basic doubly-entry bookkeeping, national accounting identities, or stochastic differential equations, I'm fully capable of explaining things in a coherent and logical fashion for the layperson.

You seem driven more by an ideological bias than anything else. You seem intent on promoting this nonsense and it's not even economically efficient.

Forcing workers to put 12.4% of their income into the hands of the government, in exchange for a low (or negative) return, is nonsense.

it's not a case of the American public being able to invest better than government.

Giving 12.4% of your income to the government, in return for a politician's promise of future payment, is not an investment. It's foolishness.

Over the long-term, bonds and stocks do indeed measure the growth of the economy. The problem with private ownership of these instruments is that they don't grow in a linear fashion.

Over a 40 year career, they will grow much more than the promised payout of Social Security.

As Oldfart and myself have repeated pointed out, the only thing left in this scenario are transactional costs, which are a subsidy for the financial factor.

As compared to the current system, which is a subsidy for big government.

I understand math better than all of them combined. Whether it's basic doubly-entry bookkeeping



You're killing me man.
Remind me again who loses when the value of my stock increases.
What's the negative side of the balance sheet for that one?
It was funny the last time you confused that one.

 

[oldfart]

Remind me again who loses when the value of my stock increases.
What's the negative side of the balance sheet for that one?
It was funny the last time you confused that one.

In case you haven't noticed, the stock market is a slightly negative sum game. No one has actually won, no matter how much they are "ahead" until they cash out. The transactions cost mover it from a zero-sum to negative-sum game.

In a market that has to clear in a finite period, like commodities and futures markets, the net winnings are always zero, less transactions costs.

When the value of your stocks increase, you are no wealthier, you just think you are. And that by catering to your ego makes you think you are smarter than you are. You are setting yourself up for the next down market.

BTW, how is your gold position doing?

 

[Toddsterpatriot]

Remind me again who loses when the value of my stock increases.
What's the negative side of the balance sheet for that one?
It was funny the last time you confused that one.

In case you haven't noticed, the stock market is a slightly negative sum game. No one has actually won, no matter how much they are "ahead" until they cash out. The transactions cost mover it from a zero-sum to negative-sum game.

In a market that has to clear in a finite period, like commodities and futures markets, the net winnings are always zero, less transactions costs.

When the value of your stocks increase, you are no wealthier, you just think you are. And that by catering to your ego makes you think you are smarter than you are. You are setting yourself up for the next down market.

BTW, how is your gold position doing?

In case you haven't noticed, the stock market is a slightly negative sum game.

It is? I suspect you are mistaken.
Giving 12.4% of your lifetime income to government is better?

The transactions cost mover it from a zero-sum to negative-sum game.

I think you're confusing the stock market with the derivatives market.

When the value of your stocks increase, you are no wealthier, you just think you are.

When I compare my promised Social Security benefits to my current portfolio, I can tell which is larger. It was also larger in March 2009.

And that by catering to your ego makes you think you are smarter than you are.

No, just smarter than those who feel Social Security will do better than the long term returns of the stock market. I can tell which pot of money is going to give me more in retirement.

You are setting yourself up for the next down market.

And my portfolio will still yield more benefits than Social Security.

What gold position?

 

[Toro]

I have a little experience on the retail end of the investment business. You are correct that fees are lower on larger amounts under management. Most folks don't have the savvy you do. They go to an investment advisory rep to get a managed portfolio and pay a fee that averages about 2% of the value of the portfolio per year. Or they go to mutual funds where the 12(b)-1 fees are 1% or more, not counting front loads or the expenses RIC get to deduct before computing net investment income.

If SS had a DC option, given the size of SS, fees would almost certainly run below 50 bps, and most likely run in the 20-30 bps range. That's the cost for DC plans at the state level for public pension plans.

The surveys done indicate that about 85% of workers would stay with Social Security as opposed to private accounts. I would rather see a hybrid where a core Social Security program would remain like it is now and a carved out supplemental amount (which would still be mandatory) could be credited toward either traditional SSA or privatized accounts.

I think most people should stay in SS. Perhaps the option for those who wanted to opt out would be a portion in SS and they could invest the rest on their own. But I do think that SS should be more than government bonds. There are few pension plans or annuities that invest solely in Treasuries.

 

[Kimura]

My plan doesn't lead to more government control of the economy.
I like my plan better

RIIIGGGHHHT. Giving working Americans more $$$$ by eliminating FICA, and giving retirees and the disabled more $$$$ (thus giving them MORE spending power) is clearly giving the government "more control".

You seem intent on subsidizing money manager capitalism.

Forcing workers to put 12.4% of their income into the hands of the government, in exchange for a low (or negative) return, is nonsense.

Again, this was done for political reasons, not out of economic necessity, which both Keynes and FDR elaborated on.

Ok great, so eliminate FICA and we fund it out of the general revenue. There's no reason to keep such a regressive tax in place.

Giving 12.4% of your income to the government, in return for a politician's promise of future payment, is not an investment. It's foolishness.

See above.

Over a 40 year career, they will grow much more than the promised payout of Social Security.

Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only beneficiaries would be the financial sector due the potential for significant transaction costs. Over the next 40 years, quite frankly, I rather see an expansion of the economy and an increased standard of living for the majority of Americans, not for money manger capitalism (the very people that are responsible for the crisis).

As compared to the current system, which is a subsidy for big government.

The government doesn't need a subsidy, why would it? It issues the currency and creates net financial assets by virtue of spending. It seems pretty clear you're singularly obsessed with policies that benefit the financial sector. That's fine, just be honest about it.

Repeat after me: the funds used to pay our taxes and purchase government securities come from the very act of spending itself.

You're killing me man.
Remind me again who loses when the value of my stock increases.
What's the negative side of the balance sheet for that one?
It was funny the last time you confused that one.

I already explained it more than once, I can post it again.

 

[Toddsterpatriot]

My plan doesn't lead to more government control of the economy.
I like my plan better

RIIIGGGHHHT. Giving working Americans more $$$$ by eliminating FICA, and giving retirees and the disabled more $$$$ (thus giving them MORE spending power) is clearly giving the government "more control".

You seem intent on subsidizing money manager capitalism.

Forcing workers to put 12.4% of their income into the hands of the government, in exchange for a low (or negative) return, is nonsense.

Again, this was done for political reasons, not out of economic necessity, which both Keynes and FDR elaborated on.

Ok great, so eliminate FICA and we fund it out of the general revenue. There's no reason to keep such a regressive tax in place.



See above.




Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only benefit are the transaction costs for the financial sector. Over 40 years, I rather see an expansion of the economy, not for money manger capitalism, which are the very people that are responsible for the crisis. And so this should have no influence on the economy, or total savings, or anything else apart from generating transactions costs?

As compared to the current system, which is a subsidy for big government.

The government doesn't need a subsidy, why would it? It issues the currency and creates net financial assets by virtue of spending. It pretty clear you seem singularly obsessed with policies that benefit the financial sector. That's fine, just be honest about it.

Repeat after me: the funds used to pay our taxes and purchase government securities come from the very act of spending itself.

You're killing me man.
Remind me again who loses when the value of my stock increases.
What's the negative side of the balance sheet for that one?
It was funny the last time you confused that one.

I already explained it more than once, I can post it again.

Over 40 years, I rather see an expansion of the economy,

Yes, letting people invest their own money will expand the economy.

I already explained it more than once, I can post it again.

Yes, please post your confusion again.

 

[Toro]

Over the long-term, bonds and stocks do indeed measure the growth of the economy. The problem with private ownership of these instruments is that they don't grow in a linear fashion.

If one group of people retire, they may do very good compared to the normal rate of return, but another group may not be so lucky.

But that's also true of investing in government debt.

Crediting recipients at 2%-3% or whatever they are earning today in SS will 99.99999% certainly underperform risk assets over the next several decades.

As an example of how badly governments have fucked up around the world, Kingdom of The Netherlands bonds were at 495-year lows in Nov/12. Would you be willing to bet that government debt would outperform risk assets over the next 30 years at those levels?

 

[Toro]

Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only beneficiaries are the financial sectors due the potential for significant transaction costs. Over the next 40 years, quite frankly, I rather see an expansion of the economy and an increased standard of living for the majority of Americans, not for money manger capitalism (the very people that are responsible for the crisis).

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

 

[Kimura]

Over the long-term, bonds and stocks do indeed measure the growth of the economy. The problem with private ownership of these instruments is that they don't grow in a linear fashion.

If one group of people retire, they may do very good compared to the normal rate of return, but another group may not be so lucky.

But that's also true of investing in government debt.

Crediting recipients at 2%-3% or whatever they are earning today in SS will 99.99999% certainly underperform risk assets over the next several decades.

As an example of how badly governments have fucked up around the world, Kingdom of The Netherlands bonds were at 495-year lows in Nov/12. Would you be willing to bet that government debt would outperform risk assets over the next 30 years at those levels?

Well...the Netherlands is an EU country, which changes up the calculus. But yeah, I see where you're coming from. However, the value of stocks are tied to perceived potential and earnings while bond prices are effected by interest rates, increasing when rates decrease and decreasing when rates increase.


I'm not concerned with performance for a social insurance program.

 

[Kimura]

My plan doesn't lead to more government control of the economy.
I like my plan better

RIIIGGGHHHT. Giving working Americans more $$$$ by eliminating FICA, and giving retirees and the disabled more $$$$ (thus giving them MORE spending power) is clearly giving the government "more control".

You seem intent on subsidizing money manager capitalism.



Again, this was done for political reasons, not out of economic necessity, which both Keynes and FDR elaborated on.

Ok great, so eliminate FICA and we fund it out of the general revenue. There's no reason to keep such a regressive tax in place.



See above.




Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only benefit are the transaction costs for the financial sector. Over 40 years, I rather see an expansion of the economy, not for money manger capitalism, which are the very people that are responsible for the crisis. And so this should have no influence on the economy, or total savings, or anything else apart from generating transactions costs?



The government doesn't need a subsidy, why would it? It issues the currency and creates net financial assets by virtue of spending. It pretty clear you seem singularly obsessed with policies that benefit the financial sector. That's fine, just be honest about it.

Repeat after me: the funds used to pay our taxes and purchase government securities come from the very act of spending itself.

You're killing me man.
Remind me again who loses when the value of my stock increases.
What's the negative side of the balance sheet for that one?
It was funny the last time you confused that one.

I already explained it more than once, I can post it again.

Over 40 years, I rather see an expansion of the economy,

Yes, letting people invest their own money will expand the economy.

I already explained it more than once, I can post it again.

Yes, please post your confusion again.

No, it doesn't result in new $$$$ in the economy.

You said the government would decrease SS payments and the employees would invest $$$ in stocks or whatever. The government would have to issue Treasuries under the current arrangement to cover any decreased revenues.

Under the current arrangement, for a third time, we give the government SS tax $$$ and we get it back later which is the functionally the same as purchasing a bond minus the returns.

Employees would ostensibly purchase stock from somebody else. All the stocks have done is change hands as no new $$$$ will enter into the economy.

Think about it.

We have people that stopped their SS buy in (the same as a bond purchase) and bought some stock instead. All we have is a situation whereby some stock and bonds change hands, but total stock and bond levels remain unchanged. This will have zero influence on the economy or savings except for creating transactional costs.

If we get rid of FICA, under my proposal, it's impossible to say its solvent or insolvent with a funding guarantee like Medicare. It becomes indefinitely sustainable since the federal government becomes committed to making payments. Forever.

 

[Kimura]

Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only beneficiaries are the financial sectors due the potential for significant transaction costs. Over the next 40 years, quite frankly, I rather see an expansion of the economy and an increased standard of living for the majority of Americans, not for money manger capitalism (the very people that are responsible for the crisis).

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy. And even if someone does manage to save, ZIRP prevents a decent yield. I can even make the argument the modern 401k is a Ponzi Scheme.

This where the government can step in and give retirees and the disabled significantly more spending power. It's more efficient from the macro balcony.

 

[Toddsterpatriot]

Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only beneficiaries are the financial sectors due the potential for significant transaction costs. Over the next 40 years, quite frankly, I rather see an expansion of the economy and an increased standard of living for the majority of Americans, not for money manger capitalism (the very people that are responsible for the crisis).

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy. And even if someone does manage to save, ZIRP prevents a decent yield. I can even make the argument the modern 401k is a Ponzi Scheme.

This where the government can step in and give retirees and the disabled significantly more spending power. It's more efficient from the macro balcony.

The profit motive is involved.

Heaven forfend!

On the other hand, the public sector serves everyone

Like Solyndra?

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with.

It's amazing how hard it is to fund an IRA when the government takes 12.4% of your money, before you even see your paycheck.

And even if someone does manage to save, ZIRP prevents a decent yield.

As though cash balances and Treasuries are the only way to earn a yield.

 

[Kimura]

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy. And even if someone does manage to save, ZIRP prevents a decent yield. I can even make the argument the modern 401k is a Ponzi Scheme.

This where the government can step in and give retirees and the disabled significantly more spending power. It's more efficient from the macro balcony.

The profit motive is involved.

Heaven forfend!

On the other hand, the public sector serves everyone

Like Solyndra?

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with.

It's amazing how hard it is to fund an IRA when the government takes 12.4% of your money, before you even see your paycheck.

And even if someone does manage to save, ZIRP prevents a decent yield.

As though cash balances and Treasuries are the only way to earn a yield.

It comes to to what we called necessary vs discretionary. Necessary goods are public goods (better managed through public control/responsibility) or public utilities, for example, which are very regulated if private. On the other hand, where we probably agree, all discretionary goods are better left to the private sector.

On Wall Street, or what we call money manager capitalism, the only goal is a return on capital and increasing capital. The public sector, whether it be management or investment, has a goal of improved social benefit which should be coordinated and distributed.

Wtf with Solyndra?

 

[Toddsterpatriot]

Net private financial wealth equals public debt down to the last penny.

FRB: Z.1 Release--Financial Accounts of the United States--September 25, 2013

Really? I see net wealth as larger than public debt.

I'm talking about net financial assets. One's financial asset is offset by a another's financial liability. Bonds and currency are financial assets. In the aggregate, as a matter of accounting, net financial wealth must ultimately equal zero.

REAL assets aren't offset by another liability which means at the aggregate level net wealth would equal the value of real assets. For example, you may have purchased and automobile and went into debt. The car note (financial liability) would be offset by the financial asset held by the loan company. Since they ultimately net to zero, what we have left is the value of the real asset - the automobile.

Sorry about the confusion. I'm mostly concerned about with financial assets when discussing macro and monetary operations, but I will try to remember that real assets provide net wealth at aggregate and individual levels so to speak. If we subtract any and all financial liabilities from total assets - both financial and real - we're only left with real assets (aggregate net worth).

One's financial asset is offset by a another's financial liability. Bonds and currency are financial assets.

For some reason you feel stocks aren't financial assets.

 

[Toddsterpatriot]

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy. And even if someone does manage to save, ZIRP prevents a decent yield. I can even make the argument the modern 401k is a Ponzi Scheme.

This where the government can step in and give retirees and the disabled significantly more spending power. It's more efficient from the macro balcony.

The profit motive is involved.

Heaven forfend!

On the other hand, the public sector serves everyone

Like Solyndra?

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with.

It's amazing how hard it is to fund an IRA when the government takes 12.4% of your money, before you even see your paycheck.

And even if someone does manage to save, ZIRP prevents a decent yield.

As though cash balances and Treasuries are the only way to earn a yield.

It comes to to what we called necessary vs discretionary. Necessary goods are public goods (better managed through public control/responsibility) or public utilities, for example, which a very regulated if private. On the other hand, where we probably agree, all discretionary goods are better left to the private sector.

On Wall Street, or what we call money manager capitalism, the only goal is a return on capital and increasing capital. The public sector, whether it be management or investment, has a goal of improved social benefit which should be coordinated and distributed.

Wtf with Solyndra?

On Wall Street, or what we call money manager capitalism, the only goal is a return on capital and increasing capital.

Sounds like what I want, when my assets are on the line.

The public sector, whether it be management or investment, has a goal of improved social benefit

A goal it so often fails to achieve, while spending more and more.

Wtf with Solyndra?

Perhaps you could explain how the public sector investment in Solyndra serves everyone?

 

[Kimura]

FRB: Z.1 Release--Financial Accounts of the United States--September 25, 2013

Really? I see net wealth as larger than public debt.

I'm talking about net financial assets. One's financial asset is offset by a another's financial liability. Bonds and currency are financial assets. In the aggregate, as a matter of accounting, net financial wealth must ultimately equal zero.

REAL assets aren't offset by another liability which means at the aggregate level net wealth would equal the value of real assets. For example, you may have purchased and automobile and went into debt. The car note (financial liability) would be offset by the financial asset held by the loan company. Since they ultimately net to zero, what we have left is the value of the real asset - the automobile.

Sorry about the confusion. I'm mostly concerned about with financial assets when discussing macro and monetary operations, but I will try to remember that real assets provide net wealth at aggregate and individual levels so to speak. If we subtract any and all financial liabilities from total assets - both financial and real - we're only left with real assets (aggregate net worth).

One's financial asset is offset by a another's financial liability. Bonds and currency are financial assets.

For some reason you feel stocks aren't financial assets.

Here's what I said over three separate posts:

Individuals or firms selling stocks have bank accounts, right? For example, if an investor purchases assets from a seller, such as a corporate bonds or stocks, then payments are made from the bank to the seller. In order for any payments to be cleared and settled, a debit will be made from the reserve account of the bank buying these assets to the reserve account of the seller’s bank. Total net bank reserves are unaffected (unless the seller has a deposit account at the purchasing bank, then the bank will just credit more $$$$ to seller’s deposit account, both the bank’s reserves and aggregate reserves will remain unaffected).

Your stocks can payout dividends or you can sell them, correct? Bank accounts are settled and cleared when this occurs. If you sell say, 10k worth of Cisco, one account is debited and another is credited, settlements are made in dollars. Those dollars are non-government assets, but are also liabilities of the government sector.


The net worth of the private sector can indeed increase if private sector financial assets are negative, such as time period between 1997-2008.

Net worth is calculated through valuations, but accounting flows aren't dependent on such valuations. Your example of a certain type of financial asset (stocks) is used when we calculate net worth.

If the market price for a certain stock is $40 and then I purchase one share of the stock from you for $60, all that occurs in this transaction is that I have $60 less then I had and you have $60 more than you had previously. I have one more share of stock, you have less share. Also, the stock's market price went from $40 to $60.

Everyone else who owns a share of this stock thinks they're $20 wealthier per each share. This happens when the stock market goes up across the board.

Hey, wait a minute, what happens when the private sector net financial assets go negative yet net worth increases? Oh yeah, a bubble.

We can even sub-divide the both the government sector and private sector into smaller components in a stock-flow consistent model if we really wanted to.

Either way, even those of us in the private sector who want to take in more $$$$ than we spend in aggregate, will require that some other sector must spend more $$$$ than it receives. In this three sector example, we have the private sector, government sector, and the foreign sector.

Net financial assets of all the aforementioned sectors in the economy must add up to zero. The is a fact as a matter of accounting identity alone.

 

[oldfart]

In case you haven't noticed, the stock market is a slightly negative sum game.

It is? I suspect you are mistaken.

Actually I am not. All investors being mortal, their positions close out eventually. When all positions are closed out, the net gain must be zero. The fact you still have positions indicates you don't know what your eventual realized gain/loss will be, unless you are either immortal or forsee the future with 100% accuracy. If you want to remove the wealth illusion created by open positions and test the theory, just try the futures market.

The transactions cost mover it from a zero-sum to negative-sum game.

I think you're confusing the stock market with the derivatives market.

No, when all positions close, the transactions costs plus losses must equal gains.

When the value of your stocks increase, you are no wealthier, you just think you are.

When I compare my promised Social Security benefits to my current portfolio, I can tell which is larger. It was also larger in March 2009.

Good for you. Let me know when your are dead and have computed all of your Social Security benefits. BTW, how did you compute the actuarial value of your Social Security benefits and what assumed life span did you use? You'd have to know that to make any meaningful comparison.

And that by catering to your ego makes you think you are smarter than you are.

No, just smarter than those who feel Social Security will do better than the long term returns of the stock market. I can tell which pot of money is going to give me more in retirement.

Congratulations. How much do you charge for a reading to foretell the future?

You are setting yourself up for the next down market.

And my portfolio will still yield more benefits than Social Security.

I heard a lot of similar assertions from people whose equities portfolios were wiped out. I guess you are just special.

What gold position?

Rhetorical. What IS your inflation hedge? And do you intend to ride the next bear market all the way down?

 

[Kimura]

Sounds like what I want, when my assets are on the line.

Until the eventual control fraud, then the government will eventually have to step in and bail them out.

A goal it so often fails to achieve, while spending more and more.

I know..... those failures like the military, public education K-12, national highway system, DARPA, Medicare, SS, police and fireman, EMS, etc. You're basically saying the modern-nation state is a failure. Got it.

Perhaps you could explain how the public sector investment in Solyndra serves everyone?

It didn't. It was obviously a dud. That same amount of $$$$ could have been given to a state like Michigan to rebuild infrastructure, nuclear power, rail, etc. Well....closer to a billion or two billion but you get the point.

 

[Toddsterpatriot]

In case you haven't noticed, the stock market is a slightly negative sum game.

It is? I suspect you are mistaken.

Actually I am not. All investors being mortal, their positions close out eventually. When all positions are closed out, the net gain must be zero. The fact you still have positions indicates you don't know what your eventual realized gain/loss will be, unless you are either immortal or forsee the future with 100% accuracy. If you want to remove the wealth illusion created by open positions and test the theory, just try the futures market.

The transactions cost mover it from a zero-sum to negative-sum game.

I think you're confusing the stock market with the derivatives market.

No, when all positions close, the transactions costs plus losses must equal gains.



Good for you. Let me know when your are dead and have computed all of your Social Security benefits. BTW, how did you compute the actuarial value of your Social Security benefits and what assumed life span did you use? You'd have to know that to make any meaningful comparison.



Congratulations. How much do you charge for a reading to foretell the future?

You are setting yourself up for the next down market.

And my portfolio will still yield more benefits than Social Security.

I heard a lot of similar assertions from people whose equities portfolios were wiped out. I guess you are just special.

What gold position?

Rhetorical. What IS your inflation hedge? And do you intend to ride the next bear market all the way down?

Actually I am not. All investors being mortal, their positions close out eventually. When all positions are closed out, the net gain must be zero.

If I buy Google in the IPO at $85, why must the net gain be zero when " all positions are closed out"?


I heard a lot of similar assertions from people whose equities portfolios were wiped out.

Who held a balanced portfolio that was wiped out?

Rhetorical. What IS your inflation hedge?

Stocks of companies that can raise prices to match inflation.

 

[Bombur]

The biggest problem I have with SS is that it is a regressively funded transfer payment. Things like disability and the transfer payment portion of the retirement benefit and unemployment benefits should be funded by a more progressive tax.