I gave the 200T number as an example of how if everybody fully invested according to the ideal formula, the entire system would fall apart. The reality is capital markets only work when a minority (less than 20%) do the investing. It's the same old saying -- too many chiefs, not enough indians. Within our existing paradigm, you need borrowers and spenders to utilize the capital. Let's take China for example -- they are crazy savers at both the personal and government level at 40%-50%. But the money can't go anywhere and only serves to inflate asset and commodity prices causing one bubble after another.
As for social security itself, let's imagine this analog. You're in debt, having trouble meet your budget so you go to finance advisor to create a plan for you. And he says you should invest 6.5% of your money in stocks & real estate to generate more income to cover your budget. You'd think this guy was out of his mind and yet this is exactly what the invest SS idea proposes.
We already have real world comparisons to look at. Pension plans all over the U.S. are in trouble because they took the Wall Street bait that they could reduce funding but maintain the same level of payout by increasing their allocation to riskier assets. And now they are even worse conditions than ever after 3 major bubble+collapses in the past decade.
Remember that asset prices and yield are determined by supply and demand. Your "real yielding X" is not immune to market forces. If the total market cap is 20T with a yield of 5%, adding another 20T will decrease that yield to 2.5%. The yield will not magically double to 1T to 2T just because there's more money flowing into the system.
Just 2T created by the Federal Reserve has gold/commodities/bonds in nosebleed bubbles and stocks back to their 2007 highs even though we have a jobless economic recovery. What would 10T-20T do?
The Economist: 70 or bust!
"Here's the central paradox of American jobs and education. While benefits from going to college are increasing exponentially, the fastest growing jobs aren't for high-earning college graduates. They're for low-wage workers. Retail sales persons, cashiers, and food preparation workers are adding more jobs than any in the country. Their combined median wages are below $10." (Quoted from Surio's post above.
So we are going to have a new job economy of $10 to $15 an hour. Mostly service oriented jobs at that. This is full circle to the 1970's, and into the mid 70's recession. However, then, not now, one could use the lower wage jobs to survive. We bought homes for $16,000. We bought cars for $3,000. A shirt was $5.95. We were doing wages at $5.00 to a real high of $9.00.
Time goes by, things go up. Wages 20% and consumer goods 110%. (These percentages are just throw outs, not researched.) In the 90's outlooks got better for wages, people were heavily employed and employers competed for workers with much higher wages being offered. Benefits were beginning to erode in employment, however. All corporations were getting rich by dumping the normal benefits associated with employment. However, overall things looked rosy.
The government even pointed it's long finger at the banks and said in no uncertain terms "Make home loans to poor people". This caught fire. The low wagers could buy not only a house, but a crystal palace. No worry if they could pay for it, the government would tote the note.
So here we are.
So we are going to have a new job economy of $10 to $15 an hour. Mostly service oriented jobs at that. This is full circle to the 1970's, and into the mid 70's recession. However, then, not now, one could use the lower wage jobs to survive. We bought homes for $16,000. We bought cars for $3,000. A shirt was $5.95. We were doing wages at $5.00 to a real high of $9.00.
Time goes by, things go up. Wages 20% and consumer goods 110%. (These percentages are just throw outs, not researched.) In the 90's outlooks got better for wages, people were heavily employed and employers competed for workers with much higher wages being offered. Benefits were beginning to erode in employment, however. All corporations were getting rich by dumping the normal benefits associated with employment. However, overall things looked rosy.
The government even pointed it's long finger at the banks and said in no uncertain terms "Make home loans to poor people". This caught fire. The low wagers could buy not only a house, but a crystal palace. No worry if they could pay for it, the government would tote the note.
So here we are.
"The government even pointed it's long finger at the banks and said in no uncertain terms "Make home loans to poor people". This caught fire."
Completely untrue. Of all the bad loans only 15-17% are from loans the government "encouraged" banks to make to low wage earners. By no means is this catching fire.
Completely untrue. Of all the bad loans only 15-17% are from loans the government "encouraged" banks to make to low wage earners. By no means is this catching fire.