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Mercenary Pen's avatar

Feels like we are headed straight for a few years, if not some decades, of austerity. I don’t think anyone is prepared for that.

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Ernest's avatar

Defined contribution Social Security: The time to do that was 40 years ago with the 1983 compromise which started the train rolling to have the Social Security Trust Fund. Things like stocks are 20 year duration assets, so a building trust fund is a great time to invest in stocks. A really bad time would be when the system is moving into an extended pay-as-you-go system when the trust fund has been used up. At that time the liability timeframe is about 1 year. It makes no sense then to match 1 year liabilities with 20 year duration assets.

The US could have invested the Social Security Trust Fund in stocks, but missed its chance. Now we have a 30 year grind in front of us basically matching taxes to pension payments, unless the politicians want to raise taxes as Baby Boomers are retiring in order to save more money than needed to cover the Baby Boomer liabilities to build a permanent trust fund.

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