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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (15188)	11/9/2004 9:38:27 AM
From: Elroy Jetson	Respond to of 116555

If Australia is smart enough to invest Social Security funds wisely, why not the U.S.? Because the U.S. has shown no evidence of realistically dealing with finances. Let me address some issues specifically. On an inflation adjusted basis, the Dow Jones Industrials did not regain the value it lost after 1929 until 1960. If the stocks which made up the index were not changed as businesses failed, the losses would have been worse. An investment which shows losses for 30 years or worse is not suitable for a Social Security investment, except in a very small percentage. An investment scheme which periodically fails to provide the required level of retirement income merely throws the problem of providing for retirement back onto the government through a periodic massive need for welfare to subsidize the retired at exactly the worst time. I doubt that Americans will ever be able to understand this issue. A major investment for the Australian retirement system are investments in infrastructure around the world. Major cities will always need their sewerage system. Owning this utility will remain valuable in 20 years, 50 years and 100 years. This type of investment does not even exist in the United States. Another major retirement investment in Australia are Real Estate Investment Trusts with leverage (debt) substantially below 50%. This is another investment product that basically does not exist in the United States. The majority of Americans are wackos who can never be brought to an understanding of the need for this type of investing. "Cutting taxes" in favor of funding the government with debt is a perfect example of American's child-like lack of common sense when dealing with finances. As a consequence, a privatized Social Security scheme in the United States will periodically fail and at the worst times possible. The high risk investment style Americans favour does not cause major social problems only because they have Social Security payments to fall back on when their high risk strategies fail - which they always will for a certain percentage just based on statistics. Permitting Americans to direct their own investments is what Americans will favor as every American is an investment genius - except that they aren't. This will result in a large percentage of retirees dependent upon public support, which will be paid without the benefit of Social Security contributions. This is all an example of the twisted way Americans have come to understand the Monetarism which in America passes for pretend-Capitalism. Americans believe that Capitalism functions to Privatize Profits while Socializing Losses. Socialized losses are simply paid for with Public Debt or newly printed money. This is not Capitalism and it cannot function that way. Capitalism means you're taking real risk so you have to lower your expectations of returns to make sure the money is there when you need it. .