Guarantees And Private Accounts

by JoeTheEconomist October 12, 2011 10:09 AM

We are very critical of the idea that workers should be able to invest retirement money in accounts which are guaranteed by the government. 

WASHINGTON DOES NOT UNDERSTAND RISK

Virtually all of these plans create some kind of investment list which is intended to limit the free-risk that workers can take.  This idea tells you how little that Washington understands risk.  This approach doesn't limit risk, it concentrates risk in whatever assets are on the approved list.  learn more

WASHINGTON'S RECORD AT PROMOTING SAFETY AND SOUNDNESS IS AWFUL

Washington's record for monitoring the saftey and soundness of any financial system is awful.  They failed to protect housing.  They failed to protect banking.  What makes anyone think that Washington will be any more successful at protecting worker's retirement.learn more

WHO WILL PROTECT THE SYSTEM FROM WASHINGTON

This approach will increase the footprint that Washington creates in our stock markets.  When Washington creates a list of approved companies, it creates "access".  Access to the approved list will be highly valued.  It is a matter of prestige.  It is a matter of cost of funds.  Access will be worth a LOT OF MONEY.  To give you some prospective, the S&P 500 is a similar list which drives investment decisions.  Access to this list can be worth hundreds of millions of dollars.  It is difficult to imagine how Washington plans to protect retirees from political influence because every district will have a company that wants "access" to cheap-funds.

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Privatization

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