"What does this have to do with FRO?"
Considering the shaky legs that FRO is standing on, it's not a huge stretch of the imagination to think that if FRO folds up shop there will be a number of folks looking at the SSA as their retirement fall back position. On top of that, I assume that most folks on this board were wage earners with the US at one point in time or another. Whether you agree with the idea of SSA or not, I'm sure that once your wages are deducted you would want those funds to used for there intended purpose effectively.
How's that for off the cuff thinking? ;o) Have a good weekend!
Just because socail programs are available does mean they always have to be used. These programs are set up as insurance. When I hear folks say that they paid into it so they're going to collect no matter whether they need it or not I ask them if they have air bags in their car. They've paid for them as well but I don't see folks doing head ons into staionary objects to get the full value of what they paid for.
Roger the cash flow problem that you're talking about is actually a demographic problem. In that we have fewer people in the work force and more retiring. Social Security is required to buy government bonds with an expectation of return on them to finance it's obligations. Because they are such a huge buyer of those bonds the return on them is reduced which actually compounds the demographic problem further. There is also the very real possibility that the real rate of return on US government bonds going negative.
If SSA was allowed to buy an ETF type of security it would also skew the market but It could act to reduce volatility (I know that volatility is almost none today but we're looking at a long term fix here.) to the domestic market.
I know that calling it a sovereign fund isn't the greatest example. Norway and Dubai both do well with theirs. I'm sure that there others as well but with the US, as Nikky pointed out, the sheer volume of money would completely skew the market. Also, those funds are allowed to invest in individual companies. As you, I think correctly point out, the possibility/probability of of misuses if individual comapnies could be invested are real and problematic. That's why the investment would have to cover the broad market. I used the example of the ETF SPY earlier. The parameters could be defined even further to companies above a particular market cap with bias towards companies based onshore. This would give CFO's something to think about if they started to think about going offshore.
I also agree that "SS was NEVER meant to be a retirement plan". Which is why I suspect you'll see means testing as a fix before the salary cap is eliminated.
As I pointed out earlier, I can't see that percentage being over 5%. I think that you're entirely correct in that even a small percentage of the trust fund is an enormous amount of money flowing into the market. It certainly would skew results. On the plus side, all of those "Technical" guys would have to change their play books and be basically blind for 20 years. ;0)
I completely sympathize with the idea of only using governemnt bonds for social security. Here's the thing though, todays yield is near zero, there's an increasing possibility of that yield going negative. If that happens not only does the trust fund have dempgraphics going against it it also will be, in real terms, paying out for holding bonds. In that environment, scrapping the cap. (ie,raising taxes) is going to be impossible. Raising the retirement age has already been done.
I really don't want an arguement. I'm looking for a discussion and opinions. Social Security isn't going away. Nor is it "upside down" yet. It will be at some point in the future due to demographics that you have correctly pointed out. To ensure that doesn't happen changes will need to be made. Just like they needed to be made in the past. I don't see raising the retirement again as one of those viable changes. The thing that I hear the most is instituting some sort of means testing. I'm not opposed to that but I can certainly see a complete freak out in some quarters should that get seriously suggested. The idea of a sovereign wealth fund scratches a lot of itches. That's why I'm floating the idea.
"...the SSTF is now full of IOUs..."
A bond is nothing more than 4 letter word for IOU. Of course the trust fund is full of IOUs. Currently, it's only allowed to hold US Debt. The question is should they be allowed to hold equities also?
Previously, there were some suggestions that individuals should be able to invest their SS benefits on their own. I don't recall anybody suggesting that the SSA be able to so on the whole. The only way that I can see this working at all is if the SSA invested a set defined portion of current and future withholdings into a broad ETF type of vehicle, simliar to SPY. This would do two things. It would offer a higher return thus extending solvency of the fund and tamp down volaility on the market over all.
If concept the of this is agreeable then the next step would be to figure out what sort risk the nation would be willing take. It would have to be written into a charter with maximum percentage of what would be invested, 5% would seem the max to me. After all, if the market had a huge drop, it would seem obvious that tax dollars would end back stopping the fund, much like Fannie and Freddie recently. Like I said, a puppy chasing chasing it's tail;.
Should Social Security be able to diversify from soley owning bonds into having equities, ala a sovereign wealth fund? Some one posed this question to me the other day and I've been like a puppy his tail. I think it's a brilliant idea if done well but could possibly be a complete train wreck with the possibility of misuse.
One other thing about Pine Bend. That pollution plume under Rosemount wasn't from the waste water plant discharge. The watse water plant uses a bacteria (Bugs) as part of threatment cycle. If there's to much effluent the bugs have a habit of grorging themselves to death. When they die in the ponds they are collected for disposal. Koch would dispose of them in pits called a land farm on the back side of the plant. These pits would leach into the aquafer and that's what caused the plume. That land farm was Grade A NASTY! If you leave a pile of coal undisturbed for a year, you'll find weeds growing there. Nothing grew in that land farm.
Yep, Pine Bend. I was there from '88 to '90. I hope they got their act together. My experience there will keep me skeptical. It's funny that Wiki mentions the waste water plant. Right after I left one of the guys that I worked with went to the EPA as a whistle blower and made an enormous amount money. I'm sure that waste water plant is brand new and state of the art today because of it.
While I was there they would use the safety manual as club to beat you with. It would sit and collect dust until there was an accident. Then the Safety Manager would find a section in it to justify why the company wasn't at fault. As a tell tale, they had 2 full time nurses on day shift and one on each of the back shifts.
I left Koch and went to work for Exxon. The differences between operations and expectations would worlds apart. Say what you want about Exxon but their culture is one of competence.
"nikko, didn't you mean to say it was dangerous and dirty "in spite of" OSHA and EPA over sight?"
Nope, they had a habit of doing what they wanted. If they got caught, which was rarely, they would go to court, pay the fine and move on. There's a town called Rosemount, Mn. near the plat that I worked at. The aquafer below the town is so polluted that the plant, by law, has to draw a calcul;ated amount (It's been too long, I can't remember how much.) to keep the plume below the town from expanding.
It's an old plant that, up until I left, had an average of one death a year. Sure enough, 3 guys died in 3 seperate incidences, while I was there. I had enough of my own close calls that I shiver to think about it today.
I worked for Koch Industries for 3 years. It's, by far, the most dangerous, dirtiest US plant that I've worked in. I can only imagine what the place would have been like without OSHA and EPA over sight.
You guys should check out "the energy collective". It's a site sponsored by Siemens and Shell. It will give both of you guys plenty of meat to chew on.
"If you would like to see other sources to confirm Mr. Obama's intentions, just let me know."
Barber, I find your sources and conclusions, to be kind, suspect.