Comments on: It’s your money

By: Anticorium

Anticorium — Sun, 30 Jan 2005 02:49:42 +0000

If GloboChem is accused of discriminating against African-Americans, there will be a movement from Operation PUSH to divest. How could they divest? Globochem owns everything so you don’t have to.

By: Nicholas Gruen

Nicholas Gruen — Sat, 29 Jan 2005 11:24:22 +0000

I can’t see the problem. 1. Obviously any govt investment in stocks has to be at arms length and managed the way the Fed manages monetary poliy. 2. One can allow people to choose private funds – providing they conform to whatever guidelines one wants to promulgate about such accounts, and those accounts can market their ‘sin free’ investments, according to their own various definitions of ‘sin’.

By: TM Lutas

TM Lutas — Fri, 28 Jan 2005 18:59:55 +0000

For every person who wants to stay away from a tobacco company’s stock, there’s somebody playing catchup who will want the higher yields of “sin” stocks. The social security accounts will be the ultimate in-house trading exchange. You don’t have to actually trade a stock at commission when two countervailing orders come in on two accounts. The computer can merely reassign the stock from one account to another at incredibly cheap prices with actual trades only occuring at the margin. The huge pool of equities available and the wide pool of investors means that most of the time, the vast majority of “morality” trades will be done incredibly cheaply. But the perfect does not have to be the enemy of the good. The current federal investment system works reasonably well, provides superior returns to the current situation, and is run with few expenses. There’s no reason not to simply supersize the system, let everyone in, and worry about further improvements down the road. If the federal employee system is not right for everybody, why is it acceptable for our federal employees? The bugs have already been worked out, people. All we need do is not commit to reinventing the wheel and just strive for improvement. I want us to get our public pension scheme to actuarial solvency and away from the pyramid scheme aspect of the current system. We can take significant steps to make things better with private accounts and should not forego the benefits because version 1.0 isn’t perfect. The current system isn’t perfect either. It’s your body doesn’t mean we toss toddlers out of the parental home. It’s your money doesn’t mean that we leave them without a long transition to financial independence. Let’s be real.

By: Darren

Darren — Fri, 28 Jan 2005 13:52:53 +0000

“I would have thought that your quest for real money would lead you to demand that these promises be kept.” Well, yes. But how will the promise be upheld? Why should you invest in a company to forfeit return just to pay someone’s pension? Or, if you invest your life savings in a pension fund why should your fund invest in a company that gives a poorer return because a part of the profit is being diverted to the companies pension fund? To clarify – I’m not talking about the company who made the promise being allowed to default. Certainly, not. I’m saying that the company will not be in a position to uphold the promise because they will not be able to attract the capital required for production and hence to generate profits.

By: Jack

Jack — Fri, 28 Jan 2005 12:54:17 +0000

darren, Syphoned off! These are promises the companies made to their workers in order to get them to do work. The syphoning off is just asking them to pay up. I would have thought that your quest for real money would lead you to demand that these promises be kept.

By: Darren

Darren — Fri, 28 Jan 2005 09:13:18 +0000

One issue wrt pensions is that Western stocks are being dismissed by stock pickers (the ones I read, anyway) because a profit analysis shows that the investors profit is being syphoned-off to pay someones pension. Why bother buying shares in a company with a huge pensions overhang when you buy shares in a company in another part of the world where the labour looks after there own welfare. (This issue is negligible compared to the currency issue though).

By: trostky

trostky — Fri, 28 Jan 2005 03:20:09 +0000

How does the complaint about investment choices honestly differ from the usual complaints from pacificts (“Why do I have to pay for warplanes?”), health nuts (“Why do I pay for tobacco subsidies?”), the childless (“Why do I have to pay for schools?”) and libertarians (“Why do I have to pay for anything?”). Investing in a total-market index would give everybody an equal right to gripe, and meanwhile the pro-lifers could put themselves in hock to MBNA instead Citibank, while the pro-choicers could do the reverse (and there’s your economic benefit to the shareholders).

By: Scott

Scott — Fri, 28 Jan 2005 00:49:49 +0000

One of the objections to “private accounts” made by anti-govt nutjobs (a group of which I’m a proud member) is that w/ govt money comes govt control, and investing SS money in the stock market will socialize the market more than it will privatize retirement. How about just investing what’s taken from me at gunpoint into t-bills, and handing me the bundle when I retire (or let me leave them to whoever I want if I die before then)?

By: Ginger Yellow

Ginger Yellow — Thu, 27 Jan 2005 23:46:51 +0000

This is grossly simplified, and doesn’t apply in every Muslim country, but Islamic finance usually has a way around the usury prohibition. But you need an income generating physical asset (property being the most obvious type). Interest payments are replaced by rents or “profit sharing” from the use of the asset. Each country has a group of Islamic scholars who decide what finance techniques are sharia compliant and which are not. Of course in America Muslims can decide for themselves. As far as I’m aware, there’s nothing stopping Muslims from investing in stocks – dividends and capital gains are not interest, after all. Bonds are another matter entirely.

By: Sebastian Holsclaw

Sebastian Holsclaw — Thu, 27 Jan 2005 23:30:15 +0000

“The most appropriate investment vehicle would be a broad-based index fund such as the Wilshire 5000, which invests in pretty much every public company in the US, weighted for market capitalization.” I would think the bolded section would provide a partial answer. Boycotts would still be effective in causing pressure. I also suspect that standards of investment vehicles would be workable. I’m against large-scale privitization because it would provide a huge incentive to tinker with the markets in ultimately unproductive ways. Furthermore given any bad year or two in a row there would be huge pressure to make up the difference which would encourage risky investment (yes I know there is a specific economics term for this, but for the life of me I can’t remember it) and would strongly encourage the government to take actions which would likely be inappropriate in the long run (see Sarbanes-Oxley). “A system of transfer payments can’t be “solvent” or “insolvent” unless the producing class isn’t actually producing enough to make the transfer payments.” Umm sure if you are willing to tax everything out of the producing class and they are willing to let you do it. (See black markets in countries with high taxation as just one possible response). It still might be worth avoiding the problem if possible.

By: Uncle Kvetch

Uncle Kvetch — Thu, 27 Jan 2005 22:35:25 +0000

Ted, thanks for raising this issue. “It’s your money” only makes sense in this context if it’s immediately followed by “therefore, we are dismantling Social Security—you’re on your own.” Contrast with: “It’s your money, therefore we’re going to take it from you, and then give it back to you, but only on the condition that you invest it in ways that we see fit.” “Choice” and “flexibility” are smokescreens in this debate, meant only to obscure the fact that Social Security must be destroyed because its record of success is ideologically inconvenient for the people in power.

By: mw

mw — Thu, 27 Jan 2005 22:10:15 +0000

Though not in favor of privatization, I don’t see this as a particular problem. It seems reasonable to think of the proposed system as the equivalent of requiring people to invest some percentage of their income in an IRA. And I see no reason why the the government would be in the business of selecting a few funds to choose from—it would make more sense that it simply established standards that funds would have to meet in order to qualify for participation in the program. People could choose low-overhead stock or bond index funds or managed funds or socially conscious funds, or whatever—just as people do now with their IRAs. There would be a requirement for a fund to disclose the fees it charged. And people could take that into account, just as they do now with their IRAs.

By: roger

roger — Thu, 27 Jan 2005 22:09:47 +0000

“The temptation to misuse trillions of investment dollars for political leverage will be awesome.’ To describe it as a temptation is to trivialize it. Unless there is some constitutional amendment directing this “blind trust,” the probability is that at some point the political leverage argument will guide investment. We know this in two ways: a., the private pension plans of large corporations (GE, GM, etc.) have already displayed how pension money can be used to create short term profits, or to make the books look better than they are. Even though the regulations on private pension plans are lengthy and dense, they have allowed playing with the pension plans to accumulate to a crisis point, as anybody looking at the real crisis in retirement—i.e., the shortfalls in the Pension Benefit Guaranty Corporation—could predict. So we already see what organizations do, once they perceive the amount of money that they can potentially manipulate in the pension funds they administer. The other reason, b., is, of course, that the federal government has onsistently “borrowed” the social security surplus to pay for its tax cuts and medicare benefit hikes and wars, etc. There is no way to stop this. There is no law to commit these funds solely to Social Security that can’t be overturned by the lawmakers. And they have to pay no price for breaking into what Gore quaintly called the ‘locked box.” That is, there is no record of taxpayers rising up in revolt about this issue. Given the choice of a tax break that is financed by diverting Social Security funds or a ‘locked box,’ the electorate has been very clear: break the piggy bank. The prediction that the legislators will be “responsible” lacks, I think, the democratic mechanism that makes legislators reponsible: a consituency tha would guard this blind trust from being misused by punishing the legislators who vote to misuse it. So—‘temptation’, here, rather misdescribes the rational economic action that will lead to pissing away Social Security. In the end, nobody will care, and when the shortfalls come, we will simply borrow the money. What is the world gonna do, stop lending the U.S. money? I don’t think so. From one end of eternity to another, we are God’s favorite investment.

By: Darren

Darren — Thu, 27 Jan 2005 22:07:47 +0000

For instance we have this … “For most of his life, the sheikh went by the proper Scots name Ian Dallas. In the 1960s, he worked as an actor and promoter, making the scene in London and Paris and hanging with Allen Ginsberg, the Beatles, and other hippie icons. Increasingly disillusioned with the counterculture, Dallas wound up in Morocco, where he met the Sufi spiritual leader Sheikh Muhammad ibn al-Habib and became a Muslim. ” and this … “Sheikh Abdalqadir came to believe that if there was anything a group of Western Muslims was best positioned to contribute to the world, it was an Islamic cleansing of the global financial system. And so he set his closest followers – in particular Umar Vadillo – the task of studying classic Islamic texts on money, with a view to drawing out their modern implications. The result, published in 1991, was the “Fatwa Concerning the Islamic Prohibition of Using Paper-Money as a Medium of Exchange.”” from an old wired link

By: Darren

Darren — Thu, 27 Jan 2005 21:47:15 +0000

“I don’t believe that Social Security is usury for the purposes of sharia law.” Muslim finance is a fascinating subject: look-up the “Scottish Sheikh Abdulkadir As-Sufi (Ian Dallas)”.