« Koranic Duels Ease Terror | Main | Exhortation »

February 09, 2005


the recent stories about Britain and Chile's privatization experiment seal the deal for me.

British investment banks refused to manage the tiny accounts for less than 1.5% of principal annually. Other charges, including transaction and brokerage fees, have crushed the effective rate of return.

The idea of "borrowing" your soc sec payments from uncle sam, and keeping the spread over 3% is interesting. But what happens when you don't cover the spread? Is the US going to make up the shortfall? (politically, the answer is yes.)

So now the US capital markets get a guaranteed huge flow of money (offset of course by Uncle Sam's need for borrowing) seeking RISKY investments. Who is going to set the rules as to the accepted investment vehicles? How are they going to stand up to the political pressure from the congressmen responding to the concerns raised by those on the outside? This looks like an utter disaster to me.


Francis: yes, for me it's the Iraq war all over again. By which I mean: I was against the Iraq war. I thought it was a terrible idea. I didn't particularly think that this administration would do a wonderful job of prosecuting it, but I thought they'd be competent. Or at least: that they wouldn't be so incompetent as to go in without a plan for what happened after Baghdad fell. And I was just dumbstruck when they did.

So here: I am not in favor of privatizing Social Security, in whole or on part. But there are ways and ways of doing it, and this one seems like a spectacularly bad one. So again, it's not just that they made the wrong policy choice, it's a level of ineptitude for which I never seem to be adequately prepared.

Q: if the situation was unclear only six or seven years ago, does that not challenge our assurance in the current clarity?

Not quite how I wanted to phrase that but it's early on the left coast.


I don't think "unclear" is the right word. SSA uses relatively pessimistic assumptions in its forecasts. This is sensible and prudent. The economy outperformed the assumptions, reducing the size of the problem.

I'm sorry for the threadjack, but is Edward in transit? I just saw on CNN a report about the Madrid bombing by ETA and it worries me because it was linked to the opening of an art show. I've got to get to bed now, so apologies for dropping this in the middle of your discussion.

The comments to this entry are closed.

Blog powered by Typepad