5 ms·

Public pension schemes always end up being turned into Ponzi schemes for short term political gain, especially as birthrates keep dropping. US social security

by KK7NIL 2y ago

Public pension schemes always end up being turned into Ponzi schemes for short term political gain, especially as birthrates keep dropping. US social security and Medicare are a great example of this but you'll find similar examples throughout the western world. In contrast private retirement plans put the individual in charge of their own retirement (why should the government be telling you when to retire?) and doesn't put a financial burden on unborn generations.

pjc50 2y ago
> financial burden on unborn generations. The money always has to come from the labour of the future somehow. So you get the same burden laundered through the private sector, such as young people having to pay extortionate rents to retired landlords.
- dsheets 2y ago
  Why must the money come from future labor? Money can be saved and invested. Let them eat their capital and not their young.
  - kome 2y ago
    investment is literally future labor expectations. and a risk. in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications. don't think they are free.
    - KK7NIL 2y ago
      > investment is literally future labor expectations. and a risk. This is simply Marxist crap and outright untrue. > in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications This is a rather new phenomenon and not at all necessary for profitable private investment. It's really completely irrelevant to the discussion.
      - ben_w 2y ago
        > This is simply Marxist crap Not only but also. Adam Smith counted labour this way, along with capital and natural resources. Until we're all rendered unemployable by AI[0], there's still human labour doing stuff in the system — the bedrock foundation for all the rest. [0] 2^(1 + roll a D4) years? I expect it to be relevant on the timescale of me reaching pension age, but between Scylla[1] and Charybdis[2] I'm not at all certain. [1] smoke-and-mirrors marketing [2] exponential growth
    - dsheets 2y ago
      If you redefine everything as deriving value from labor and labor alone, OK. Government intervention is not a given, is not universal, and its impact on labor isn’t unique. There are other investment vehicles besides equity and other ways to take value from past into future that are neither garnishing the wages of children and grandchildren (most current state systems) nor investing in artificially inflated markets. Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.
      - ben_w 2y ago
        > If you redefine everything as deriving value from labor and labor alone "Alone" seems to be an unnecessary addition for the problem to exist. And until the AI really can take all our jobs, it's not a redefinition, labour is one of several pillars alongside capital, though specifics vary depending on your school of economics: https://en.wikipedia.org/wiki/Factors_of_production https://en.wikipedia.org/wiki/Factors_of_production > Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand. Consider this experiment on an island with just yourself. You bury the gold. You reach pension age, and stop working. You dig up the gold. You now have gold. What do you spend it on? There's nobody offering services, regardless of how much you offer, therefore cost of goods, services, and other assets has a divide by zero error and inflation is asymptotically infinite. Similar arguments work when the working population shrinks even if not becoming literally zero: unless technological improvements happen faster than the workforce shrinks, which is complex because tech affects different products at different rates, shrinking populations cause your model to get inflation even with gold as a currency.
    - HPsquared 2y ago
      Building a machine that does useful work is not "future labour". That kind of automatic production by machine is absolutely dominant today, none more so than in software.
      - intelVISA 2y ago
        Indeed it's future reduction, an equal or better output with less labor required.
  - deleted 2y ago
    [deleted]
- kome 2y ago
  great point.
- KK7NIL 2y ago
  This is simply not true, my investments make money from profitable business operating today, not "labor of the future". Maybe you should stop reading Marxist economists.
  - Delk 2y ago
    How will those businesses continue to turn a profit without people doing productive work for them?
- wakawaka28 2y ago
  It's not the same. If I save money it is no burden to anyone else. If I invest it, then the people receiving my investment do so voluntarily and we all make money or lose it. I have no power to exact a burden on anyone else through these simple mechanisms. The state on the other hand has virtually unlimited power to tax us into oblivion. >such as young people having to pay extortionate rents to retired landlords. There is a pathological case here when it comes to rent, but we are far from that. Rent is only extortion when there is widespread collusion to fix the prices. Otherwise it is supply and demand. If inflation and high demand have made prices unaffordable, it's not your landlord's fault. Landlords also provide a service (strange as that may sound), and aren't stealing from anyone. If you had a profitable business, you could compete with the property sector for investment. Unfortunately we have outsourced many profitable things in the West, because we're competing with slave labor.
deleted 2y ago
[deleted]
kome 2y ago
this comment can be summarized like this: https://i.redd.it/jbab7jrhvt211.gif https://i.redd.it/jbab7jrhvt211.gif after three major financial crises in the past 20 years, it’s hard to call private finance “safe” from ponzi-like risks. more than a quarter of Americans have no retirement savings at all, and the 401(k) balance for near-retirees often falls well below $100,000. but it's the logic of the argument that is faulty: declining birthrates also hurt private markets, which rely on a growing workforce just as public pensions do. do you think finance is somewhat magical? if there is no growth also the financial markets won't grow. pensions shouldn't be about growth, but they are mainly about redistribution. if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings—could be called ponzi too, except they often leave those who earn less with nowhere to turn when things collapse.
- KK7NIL 2y ago
  > declining birthrates also hurt private markets, which rely on a growing workforce just as public pensions do. Right, it's well known that the US' demographics are the foundation for its strong economy, not advancements in productivity and technology. /s > if there is no growth also the financial markets won't grow. Financial markets don't need to grow for your investments to pay off. Investing into growth stocks is very popular now a days but value stocks (which might not grow at all but have profitable operations) and fixed income are perfectly good options too. > if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings Some of them can be, the difference is that public pensions are a Ponzi scheme I'm legally forced to contribute to and have little say in. Not so for private plans.
EE84M3i 2y ago
> In contrast private retirement plans put the individual in charge of their own retirement (why should the government be telling you when to retire?) What countries let you do this? I thought 401ks, for example, do not generally allow tax free early withdrawals.
- wakawaka28 2y ago
  A 401k allows no tax-free withdrawals. On top of the taxes there are additional penalties if you take the money early, with few exceptions.
- javagram 2y ago
  Early retirement can be done through https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments#q2 https://www.irs.gov/retirement-plans/substantially-equal-per...
  - ndriscoll 2y ago
    A better, more flexible strategy is Roth conversion laddering: https://www.investopedia.com/how-roth-conversion-ladder-works-5214808 https://www.investopedia.com/how-roth-conversion-ladder-work...

by KK7NIL 2y ago

pjc50 2y ago

> financial burden on unborn generations. The money always has to come from the labour of the future somehow. So you get the same burden laundered through the private sector, such as young people having to pay extortionate rents to retired landlords.

dsheets 2y ago
Why must the money come from future labor? Money can be saved and invested. Let them eat their capital and not their young.
- kome 2y ago
  investment is literally future labor expectations. and a risk. in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications. don't think they are free.
  - KK7NIL 2y ago
    > investment is literally future labor expectations. and a risk. This is simply Marxist crap and outright untrue. > in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications This is a rather new phenomenon and not at all necessary for profitable private investment. It's really completely irrelevant to the discussion.
    - ben_w 2y ago
      > This is simply Marxist crap Not only but also. Adam Smith counted labour this way, along with capital and natural resources. Until we're all rendered unemployable by AI[0], there's still human labour doing stuff in the system — the bedrock foundation for all the rest. [0] 2^(1 + roll a D4) years? I expect it to be relevant on the timescale of me reaching pension age, but between Scylla[1] and Charybdis[2] I'm not at all certain. [1] smoke-and-mirrors marketing [2] exponential growth
  - dsheets 2y ago
    If you redefine everything as deriving value from labor and labor alone, OK. Government intervention is not a given, is not universal, and its impact on labor isn’t unique. There are other investment vehicles besides equity and other ways to take value from past into future that are neither garnishing the wages of children and grandchildren (most current state systems) nor investing in artificially inflated markets. Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.
    - ben_w 2y ago
      > If you redefine everything as deriving value from labor and labor alone "Alone" seems to be an unnecessary addition for the problem to exist. And until the AI really can take all our jobs, it's not a redefinition, labour is one of several pillars alongside capital, though specifics vary depending on your school of economics: https://en.wikipedia.org/wiki/Factors_of_production https://en.wikipedia.org/wiki/Factors_of_production > Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand. Consider this experiment on an island with just yourself. You bury the gold. You reach pension age, and stop working. You dig up the gold. You now have gold. What do you spend it on? There's nobody offering services, regardless of how much you offer, therefore cost of goods, services, and other assets has a divide by zero error and inflation is asymptotically infinite. Similar arguments work when the working population shrinks even if not becoming literally zero: unless technological improvements happen faster than the workforce shrinks, which is complex because tech affects different products at different rates, shrinking populations cause your model to get inflation even with gold as a currency.
  - HPsquared 2y ago
    Building a machine that does useful work is not "future labour". That kind of automatic production by machine is absolutely dominant today, none more so than in software.
    - intelVISA 2y ago
      Indeed it's future reduction, an equal or better output with less labor required.
- deleted 2y ago
  [deleted]
kome 2y ago
great point.
KK7NIL 2y ago
This is simply not true, my investments make money from profitable business operating today, not "labor of the future". Maybe you should stop reading Marxist economists.
- Delk 2y ago
  How will those businesses continue to turn a profit without people doing productive work for them?
wakawaka28 2y ago
It's not the same. If I save money it is no burden to anyone else. If I invest it, then the people receiving my investment do so voluntarily and we all make money or lose it. I have no power to exact a burden on anyone else through these simple mechanisms. The state on the other hand has virtually unlimited power to tax us into oblivion. >such as young people having to pay extortionate rents to retired landlords. There is a pathological case here when it comes to rent, but we are far from that. Rent is only extortion when there is widespread collusion to fix the prices. Otherwise it is supply and demand. If inflation and high demand have made prices unaffordable, it's not your landlord's fault. Landlords also provide a service (strange as that may sound), and aren't stealing from anyone. If you had a profitable business, you could compete with the property sector for investment. Unfortunately we have outsourced many profitable things in the West, because we're competing with slave labor.

deleted 2y ago

[deleted]

kome 2y ago

this comment can be summarized like this: https://i.redd.it/jbab7jrhvt211.gif https://i.redd.it/jbab7jrhvt211.gif after three major financial crises in the past 20 years, it’s hard to call private finance “safe” from ponzi-like risks. more than a quarter of Americans have no retirement savings at all, and the 401(k) balance for near-retirees often falls well below $100,000. but it's the logic of the argument that is faulty: declining birthrates also hurt private markets, which rely on a growing workforce just as public pensions do. do you think finance is somewhat magical? if there is no growth also the financial markets won't grow. pensions shouldn't be about growth, but they are mainly about redistribution. if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings—could be called ponzi too, except they often leave those who earn less with nowhere to turn when things collapse.

KK7NIL 2y ago
> declining birthrates also hurt private markets, which rely on a growing workforce just as public pensions do. Right, it's well known that the US' demographics are the foundation for its strong economy, not advancements in productivity and technology. /s > if there is no growth also the financial markets won't grow. Financial markets don't need to grow for your investments to pay off. Investing into growth stocks is very popular now a days but value stocks (which might not grow at all but have profitable operations) and fixed income are perfectly good options too. > if we dismiss public pensions as a ponzi scheme, then by the same logic, private plans—completely at the mercy of market swings Some of them can be, the difference is that public pensions are a Ponzi scheme I'm legally forced to contribute to and have little say in. Not so for private plans.

EE84M3i 2y ago

> In contrast private retirement plans put the individual in charge of their own retirement (why should the government be telling you when to retire?) What countries let you do this? I thought 401ks, for example, do not generally allow tax free early withdrawals.

wakawaka28 2y ago
A 401k allows no tax-free withdrawals. On top of the taxes there are additional penalties if you take the money early, with few exceptions.
javagram 2y ago
Early retirement can be done through https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments#q2 https://www.irs.gov/retirement-plans/substantially-equal-per...
- ndriscoll 2y ago
  A better, more flexible strategy is Roth conversion laddering: https://www.investopedia.com/how-roth-conversion-ladder-works-5214808 https://www.investopedia.com/how-roth-conversion-ladder-work...