We continue to hear the knee-jerk reactions of blaming the "unfettered free markets" for our current economic situation. We've also been told that social security must NOT be privatized, because investing in bonds, mortgage-backed securities, and gasp ... the stock market (via diversified mutual funds) ... is just TOO RISKY!
But has anyone stopped to think about the "unfettered" bailouts, impulsive regulations, and short-sighted policies of the government?
Social security is a time bomb. Current taxpayers fund current retirees. No money has ever been saved by Congress. There is no trust fund generating income, nor for us to fall back on. As the Baby Boomers keep retiring, we are nearing the time when there will be more people collecting than people paying in.
What does this mean? There's only three answers: a) current retirement benefits get cut; b) taxes are significantly increased on the younger generations; c) retirement benefits get substantially reduced for the younger generations, if not wiped out completely.
It's not Uncle Harry's retirement we need worry about, it's Uncle Harry's children, grandchildren, nieces, and nephews ... government largesse isn't a no-limit credit card that never has to be paid back. Government largesse comes with severe consequences.
By throwing out the free markets that made this young country the wealthiest, most prosperous place on Earth, we're hastily taking on EXTREME RISK! We're throwing all of our eggs into one basket - controlled by politicians, who simply don't have the experience or track record, for anyone to assume, reasonably, that we're making a prudent choice.
As a stockbroker and financial advisor for over a decade, I've seen people take longer and think more clearly over a $10,000 (conservative) investment. The historic performance of government economic decision by fiat, is dismal at best. Since no person in their right mind would buy a mutual fund (annuity, or other type of investment) with such an incredibly poor track record. Why start now?
TCS Daily has a must read article today discussing the lack of market discipline and resulting risk of allowing Congress to gamble with our future - Casino Socialism.
It's bad enough to 'gamble' Uncle Harry's retirement on bundles of mortgage-backed securities, it's quite another to put the credit of the U.S. government at risk-not just picking winners and losers in the financial turbulence, but doing so with no market discipline, little knowledge of pricing, and no clue what the industries of the future will be.
High-risk behavior is endemic when governments override market decisions. Some good will come (on the stopped-clock theory: right twice a day), but no government can deploy its forces with the efficiency market discipline provides. That is a moral problem, too, as planned inefficiency by definition sacrifices life-enhancing wealth creation, jobs, and innovations that raise living standards.
I agree with you. The problem, however, is about to get much worse. Betting on government to “solve” today’s issues, is a recipe for disaster.
Unfortunately, the people who fret over investing a couple hundred dollars in a mutual fund (because its too risky), go along with (and even advocate for) all these bailouts and knee-jerk regulations, which are significantly more risky than a plain-jane diversified mutual fund.
Your welcome. You’ve got a great blog!
Part of the problem has always been that some people are like the ant and some are like the grasshopper… some save for the future and some don’t. Those who don’t expect somebody else to take care of them. I suppose we will always have that problem. The day of an employer being responsible for a person’s retirement are over. Personal responsibility is very big with me. Since ultimately we are responsible for ourselves, the government should allow us to save the way we see fit. Social Security as is won’t get the job done.
But as always in America, those in true need should be and will be taken care of. Neighbors, churches, local communities have always stepped up. We just don’t like for the government to take our money and disburse it the way they think best.
Nothing Right or Left about that, just common sense.
Thanks for your kind comments at Right Truth, much appreciated.