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No; investments go toward productive work to create economic value. Social Security doesn't have any element that would actually create wealth. It works exact
by readams 10y ago
No; investments go toward productive work to create economic value. Social Security doesn't have any element that would actually create wealth. It works exactly like a Ponzi scheme.
- ryandrake 10y agoTo be fair, when I buy a company's stock on the public stock market, it's more of a lottery ticket than an investment. It's not as if buying a stock actually puts money into the company's pocket for them to use to "create economic value". Buying a stock puts money into the pocket of whoever last bought that stock so that they can continue gambling.
- harryh 10y agoThis is not entirely correct. By buying stock in a given company you increase demand for that company's stock and increase its value. A company's market cap is a very real thing that allows it to engage in economic activity that it would otherwise be unable to execute on.
- kgwgk 10y agoIs buying real estate or a business an investment? You're not creating economic value, just putting money into the pocket of the previous owner.
- ryandrake 10y agoI guess it depends on your definition of "creating economic value". If I buy something for $110 from someone who paid $100 for it, I guess you could argue that either you or I just "created" $10 of economic value. I don't subscribe to that. Value is only created when you improve something. Buy a lump of gold for $100 and turn it into a $110 bracelet -> value created. Buy a lump of gold for $100 and sell it to someone 1 second later for $110 -> no value created.
- kgwgk 10y agoI didn't mention gold. I asked about two cash-flow generating assets that would be considered investments by most people (but of course you can have your own definition of investment).
- ryandrake 10y agoI'm more debating the definition of "value creation" rather than "investment". But admittedly I did conflate the two terms in an earlier response. I'd offer: not all investments, even the ones that provide monetary returns, do so by creating value.
- kgwgk 10y agoHow do a business provide monetary return if not by creating value? A house also provides value (in the form of housing), why would anyone want to pay rents otherwise?
- grzm 10y agoI don't see how the analogy requires or implies the creation of economic value or productive work or any other particular use of the money, only that the money put in today is being used today for whatever purpose. Again, I'm not arguing for or against Social Security, just whether or not the original analogy is apt. If it's not, it does no harm to those arguing against Social Security unless the argument relies largely on the analogy being sound. I can't imagine that's the case at all. If it is apt, I think it likely can be expressed in a way that more clearly shows its intent.
- awinder 10y agoThis is almost too ridiculously misinformed a statement to even justify replying to, but since it's easy enough, the SS trust funds earn interest through investment as necessitated by law. They've also been used as an intergovernmental loan vehicle, acting to keep gov't debt lower than it would otherwise have been. It's not a Ponzi scheme.
- readams 10y agoThe trust fund is an accounting fiction. Social Security is paid out entirely by proceeds from people paying into the system. If ever the number of new people paying in is not enough to cover the outflows, then the system collapses. That is how a Ponzi scheme works.
- awinder 10y agoThis is fake news.
- vkou 10y agoOr, the inflows are increased, or the outflows are decreased. All of which can be done with a stroke of a pen. If, for instance, we get rid of the contribution cap tomorrow, Social Security becomes 100% funded - in perpetuity. Madoff was in no position to do so. Congress is.
- jessaustin 10y agoMercedes dealers and developers of luxury apartments in Singapore, London, etc. would love this.
- anigbrowl 10y agoWell, you hope. The value of investments can go down as well as up.