The US Politics |OT|

[Baalzamon]

sundin13 said:

Baalzamon said:
You are insinuating that buying index funds is...difficult and therefore I should trust that somebody does a good job of it.

It could literally be an automated program that just buys all shares of X index fund (there are hundreds of decent ones that accomplish the same thing). You really don't even hardly have to have any investment experience or knowledge of the market to accomplish this. I'm not suggesting this to operate like a hedge fund and to buy and sell individual stocks, try timing the market, etc.

It really isn't rocket science to "trust" somebody to buy index shares on the behalf of social security.

Who would they hire? The same people that are currently responsible for all of the bond buying should be more than capable of it. It's...so easy.

Do you feel there are any negatives in regards to the expanded role of government in the stock market?

For example, by creating a government system of private investment, you are creating winners and losers in the stock market, by benefiting the companies and shareholders who are involved in the companies which SS feeds into. This is essentially the government putting a finger on the scale of the free market.

Second, how would Social Security react to contractions in the stock market? Volatility can do a lot of damage to retirement savings accounts if someone retires during a recession. Social Security is designed to be a low risk supplement to retirement savings. Do payouts under your system decrease during a recession under your system?

Further, what is the point of Social Security under this system? Should it be replaced by automatic payments into a retirement savings account?

There are absolutely impacts associated with the government investing like this. Some could argue these are negative. I'm not going to pretend to understand every impact, but I do know there are inherent issues with having too many people invested in index funds.

How would it react to contractions in the market? The entire point of investing in the market like this isn't to just create this pool of cash that is technically owned by a person. I'm not suggesting that people get a payout at the end of their lives. I'm still suggesting that social security is more like a pension system (similar to now).

That being said, despite large stock market corrections, the stock market still averages 8-9% per year. Regardless of market corrections, you will never be able to find me a situation where an investment in government bonds was worth more than an investment in the broad stock market over 30-40+ years. Ever. The situation does not exist. It never ceases to amaze me this huge scare people have about how "risky" the overall stock market is because they see it drop 50% in a year (and proceed to ignore that a couple years later it has usually recovered all of this and some).

So to suggest that a stock market crash would ruin a system like this doesn't make any sense.