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American Entitlement Beliefs and the Economy (Page 3)
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shifuimam
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Jan 3, 2009, 10:48 AM
 
Originally Posted by CreepDogg View Post
That would be the person who purchased the loan, and they should accept the consequences, up to and including foreclosure i.e. losing their investment.

Corollary question: Who's to blame when a bank goes under because they made a large number of these loans, couldn't get their investment back, and became insolvent?
The banks, absolutely. The "dark side" of a free market society is that when a business has a poor business model (banks giving too many risky loans, American auto companies, etc.), they will eventually fail.

This $700 billion bailout is one of the stupidest things to come out of the White House since FDR's New Deal.

The people who demanded the loans for homes they couldn't afford are to blame when their houses get foreclosed on. The banks who underwrote the loans are to blame when the loans are defaulted on and they're forced to go under.

That's life. And, if we didn't have this asinine bailout to put a band-aid over the astonishing financial idiocy of the average American, perhaps people could have learned a much harder lesson from this catastrophe.
Sell or send me your vintage Mac things if you don't want them.
     
CreepDogg
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Jan 3, 2009, 12:29 PM
 
Originally Posted by shifuimam View Post
The banks, absolutely. The "dark side" of a free market society is that when a business has a poor business model (banks giving too many risky loans, American auto companies, etc.), they will eventually fail.

This $700 billion bailout is one of the stupidest things to come out of the White House since FDR's New Deal.

The people who demanded the loans for homes they couldn't afford are to blame when their houses get foreclosed on. The banks who underwrote the loans are to blame when the loans are defaulted on and they're forced to go under.

That's life. And, if we didn't have this asinine bailout to put a band-aid over the astonishing financial idiocy of the average American, perhaps people could have learned a much harder lesson from this catastrophe.
Agreed. So we have evidence that the entitlement mentality extends across the spectrum, from the poor to the richest corporations. The poor think they are entitled to own the homes they can't afford, and the banks think they are entitled to the business models they can't sustain. And lots in between.
     
Zeeb
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Jan 3, 2009, 12:39 PM
 
Originally Posted by shifuimam View Post
You're funny.

Do you know what the root cause was of all these subprime mortgages that (surprise, surprise) were eventually defaulted on?

In 1977, Jimmy Carter (a Democrat) enacted the Community Reinvestment Act. What this essentially did was allow the federal government to "evaluate" banks to ensure that they were "making mortgages available to all income levels in their community". In other words, it was a way of strong-arming banks into providing mortgages to people who could not afford them.

See, the banks weren't stupid. They were protecting themselves (and their customers' financial investments) by not approving mortgages to people who had neither the credit or the financial stability to back them up. The result was that a lot of broke people (many black, but many white as well) weren't able to own homes.

Why? Because they couldn't afford them. This was, of course, seen as a social travesty by the liberal left, so they decided to yet again get involved in private enterprise and try to "even things out" by making it pretty damn unattractive to banks to not approve mortgages for broke minorities.

Banks are rated based on CRA evaluations. By opening branches in low-income areas, they can raise their CRA rating. By approving loans to people who are essentially enormous financial risks, they can raise their CRA rating. And, to further this mess, Bill Clinton (surprise! another Democrat) further strengthened the CRA in the name of Affirmative Action and "ending minority and low-income discrimination".

The banks are not nearly as at fault here as the left wants you to believe. Yes, there was some predatory lending that went on once banks realized that such lending would improve a bullsh!t CRA rating. The real story, though, is that banks didn't really have a choice for the most part. Either they faced the possibility of federal legal retribution, or they had to underwrite risky mortgages to broke ass people who had zero business buying a home.
This isn't entirely true. Leading Democrats *and* some Republicans supported providing home loans to minorities and poor people who would have otherwise not been able to get a loan. However, those loans were to be approved for people to buy relatively cheap housing in their neighborhoods--not a McMansion in a rich suburb. The subprime mortgage mess came about because banks started lending too much money--by their own choice. There was nothing in those laws you speak about which said a bank had to lend $500,000 to a person making $25,000 a year.

If the banks had stuck to lending $75,000 to someone making $25,000 then not only would the cost of housing not skyrocketed to stupid levels but there would have been fewer defaults.

You are absolutely correct in your assertion that a person making a small income should not have even accepted a $500,000 loan and that these people need to take responsibility for their actions. However, think of a poor uneducated person walking into a bank. They meet up with a professional looking person in a new suit with a masters degree who insists that a $500K loan is absolutely doable on their income, that getting such a loan is a smart thing to do. These people were told that since the price of housing will continue to rise and rise and that they can simply sell their house for a million dollars anytime they want to pay back the loan and make a huge profit--and for awhile this worked.

I'm sorry, but no one is innocent here. You seem to indeed place the blame more on the "selfish" people who received those loans while others place the blame solely on the "evil" banks. I think polarizing this issue serves no one. We're all responsible so lets just take the most rational steps possible to fix it now.
     
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Jan 3, 2009, 01:35 PM
 
Originally Posted by turtle777 View Post
May I point out that the current system (SS, Medicare and -aid) are a giant Ponzi scheme ?
You may not like or agree with the way SS is funded, but it is not a Ponzi scheme. A Ponzi scheme, by definition, relies on consistent and perpetual growth in investments to survive. Because of this, a Ponzi scheme will inevitably at some point crash upon itself.

SS funding does not rely on perpetual growth, it simply relies upon the current generation to pay the benefits of the previous generation. Because of demographics, there will be times of surplus and times of deficit. Managed properly and with the right actuarial adjustments, the times of surplus can get the funding through the times of deficit. Managed properly, this is sustainable.

The problem isn't that SS is a Ponzi scheme, the problem is that it's poorly managed - surplus funding has been raided for other uses instead of kept for times of deficit. That behavior is not sustainable.

I should point out that this happens in private pensions as well. In the late 90s, companies were clamoring to find ways to get the excess funds from bubble investments out of their pension plans. Some were successful, but when the market went south, they found their plans underfunded, and companies had to make major expenditures to get their plans back on track (or they terminated them).

I think this speaks to the entitlement mentality, on both the public and private front - people get to feel entitled to a bull market, and when it's happening, assume it will never end.
     
turtle777
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Jan 3, 2009, 01:38 PM
 
Originally Posted by CreepDogg View Post
You may not like or agree with the way SS is funded, but it is not a Ponzi scheme. A Ponzi scheme, by definition, relies on consistent and perpetual growth in investments to survive. Because of this, a Ponzi scheme will inevitably at some point crash upon itself.


WRONG.

Dude, where have you been since Madoff blew up ?

A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit.
http://en.wikipedia.org/wiki/Ponzi_scheme

Now, what you were talking about is the reliance of US consumers to fund current consumption by future growth of their stock and house values. That is OT a Ponzi scheme, but still a serious problem, and it will, like you said, blow up. In fact, it already has.

-t
     
CreepDogg
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Jan 3, 2009, 02:01 PM
 
Originally Posted by turtle777 View Post


WRONG.

Dude, where have you been since Madoff blew up ?


http://en.wikipedia.org/wiki/Ponzi_scheme

Now, what you were talking about is the reliance of US consumers to fund current consumption by future growth of their stock and house values. That is OT a Ponzi scheme, but still a serious problem, and it will, like you said, blow up. In fact, it already has.

-t
Did you miss the next sentence in your quote?

The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.
SS does not require an ever-increasing flow of money. There is some ebb and flow due to demographics, but it does not require perpetual growth. The Madoff scheme did. The fact that you can't see the difference doesn't make me wrong.
     
turtle777
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Jan 3, 2009, 02:07 PM
 
Originally Posted by CreepDogg View Post
SS does not require an ever-increasing flow of money. There is some ebb and flow due to demographics, but it does not require perpetual growth. The Madoff scheme did. The fact that you can't see the difference doesn't make me wrong.
Dude, you don't have a faint idea how SS is funded do you ?

The government withholds SS from your paycheck and pays it into the SS fund.
Then it takes that money, in return for government IOUs (treasury notes), and uses that money to pay current SS recipients and other gimmicks. THAT MONEY IS GONE.

The treasuries are worthless paper, there is even not basis for growth since the treasuries yield near 0 interest. It's a big frigging Ponzi scheme. Nothing else. There is no money anywhere that can be used for future generation's claims.

It absolutely DOES need a constant inflow of money, because today's claims are paid by today's working people, paying into that nonexisting fund.

-t
     
CreepDogg
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Jan 3, 2009, 02:13 PM
 
Originally Posted by turtle777 View Post
Dude, you don't have a faint idea how SS is funded do you ?

The government withholds SS from your paycheck and pays it into the SS fund.
Then it takes that money, in return for government IOUs (treasury notes), and uses that money to pay current SS recipients and other gimmicks. THAT MONEY IS GONE.

The treasuries are worthless paper, there is even not basis for growth since the treasuries yield near 0 interest. It's a big frigging Ponzi scheme. Nothing else. There is no money anywhere that can be used for future generation's claims.

It absolutely DOES need a constant inflow of money, because today's claims are paid by today's working people, paying into that nonexisting fund.

-t
Yes, it needs a constant inflow of money. That's different than a perpetually growing inflow of money. Today's claims are paid by today's working people, and tomorrow's claims are paid by tomorrow's working people. Believe me, I fully understand that the money I pay in today is used to fund current benefits. I often rib my father (who is now collecting OASDI benefits) that I'm paying his salary.

Again, you may not like or agree with this methodology, but your (incorrect) use of inflammatory terminology only weakens your argument.
     
turtle777
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Jan 3, 2009, 05:09 PM
 
Originally Posted by CreepDogg View Post
Again, you may not like or agree with this methodology, but your (incorrect) use of inflammatory terminology only weakens your argument.
Heck, whatever you say.

My claim is: it's unsustainable and will eventually collapse under the burden of higher payouts than income. A classic Ponzi scheme failure.

Do you honestly believe that the current SS, Medicare and Medicaid, with an estimated debt burden of more then $ 40 Trillion(!!!), growing by triple digit Billion $ each year, will NOT eventually fail ?

Hey, I have some oceanfront property in Indiana for sale, if you are interested.

-t
     
CreepDogg
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Jan 3, 2009, 06:07 PM
 
Originally Posted by turtle777 View Post
Heck, whatever you say.

My claim is: it's unsustainable and will eventually collapse under the burden of higher payouts than income. A classic Ponzi scheme failure.

Do you honestly believe that the current SS, Medicare and Medicaid, with an estimated debt burden of more then $ 40 Trillion(!!!), growing by triple digit Billion $ each year, will NOT eventually fail ?

Hey, I have some oceanfront property in Indiana for sale, if you are interested.

-t
Actually there is some nice lakefront property in Indiana.

I'm not claiming that SS will not fail, simply that if/when it does, it's due to bad management, not an unsustainable design. In other words, something we could correct if we had the political will.

Seriously, calling SS a Ponzi scheme shows you either don't understand what a Ponzi scheme is, or you don't understand how SS works. Either way, it makes you appear less credible. By your definition, every private business is a Ponzi scheme, because it relies on a constant inflow of money (revenue) to pay its expenses and employees (costs). If a business doesn't get that inflow, would it be a 'classic Ponzi scheme failure'?
     
turtle777
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Jan 3, 2009, 06:24 PM
 
Originally Posted by CreepDogg View Post
Seriously, calling SS a Ponzi scheme shows you either don't understand what a Ponzi scheme is, or you don't understand how SS works. Either way, it makes you appear less credible. By your definition, every private business is a Ponzi scheme, because it relies on a constant inflow of money (revenue) to pay its expenses and employees (costs). If a business doesn't get that inflow, would it be a 'classic Ponzi scheme failure'?
Seriously, far more credible people than me have called SS a Ponzi scheme.
Of course, they all must be wrong.

At any rate, your comparison to business is completely Apples to Oranges.

Why ? Because unlike SS and Ponzi schemes, the business would not continue to grow a DEBT burden in order to finance its ongoing operation. If it did, it will indeed fail and go into bankruptcy. Do you understand the difference of financing ongoing operation with cashflow as compared to financing it with debt ?

SS *is* a Ponzi scheme, because the government sends me a nice overview each year, telling me how much of benefits I have earned. Well, at least they tell me that my contributions "bought" me those benefits. Will I ever see them ? Sure, Santa and the Easter Bunny are surely gonna deliver.

SS is a Ponzi scheme because people are told they have a share in this, whereas in reality, they have jack squat.

I wouldn't use that term if the government was honest enough to call my SS contribution a tax, and told me that this tax will NOT entitle me to future benefits.

-t
     
CreepDogg
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Jan 3, 2009, 06:53 PM
 
Originally Posted by turtle777 View Post
At any rate, your comparison to business is completely Apples to Oranges.

Why ? Because unlike SS and Ponzi schemes, the business would not continue to grow a DEBT burden in order to finance its ongoing operation. If it did, it will indeed fail and go into bankruptcy. Do you understand the difference of financing ongoing operation with cashflow as compared to financing it with debt ?
Happens all the time. You do know that banks have commercial loan departments for a reason, right? It's always done, even in SS's case, with the assumption that the entity will climb out of the debt burden when times get good. Sometimes it works out, sometimes not. As a matter of fact, I think we just saw a bunch of financial institutions and auto manufacturers do exactly that. Is it objectionable? Yes. Is it a Ponzi scheme? No.

I'm not claiming that the government's current behavior in managing SS is sustainable. It's not. You can't raid surpluses and expect to always get more. But that's a management issue, not a design one. Managed properly, it can work. A Ponzi scheme never can.

SS *is* a Ponzi scheme, because the government sends me a nice overview each year, telling me how much of benefits I have earned. Well, at least they tell me that my contributions "bought" me those benefits. Will I ever see them ? Sure, Santa and the Easter Bunny are surely gonna deliver.

SS is a Ponzi scheme because people are told they have a share in this, whereas in reality, they have jack squat.

I wouldn't use that term if the government was honest enough to call my SS contribution a tax, and told me that this tax will NOT entitle me to future benefits.

-t
Sounds like you're just bitter that you've paid the taxes for others and are unlikely to see any benefit. That's understandable - I'm angry about it too.

However, I think your statement is a bit of hyperbole. I think most people (and businesses, for the employer portion) view FICA as a tax. And most people understand that benefits can change (such as changing the retirement age to 67) and even are at risk.

Those statements you get are accurate, assuming (admittedly not a good assumption) that the system stays solvent and laws don't change. If you hadn't paid any tax, you wouldn't have 'earned' any benefit. In that respect, it's just a calculation showing what you'll get under the current system.

Are you saying that if, by some miracle, SS stayed solvent, that you wouldn't accept benefits when you became eligible? By your disdain in looking at the possible benefits, that seems to be the case.
     
turtle777
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Jan 3, 2009, 07:32 PM
 
Well, obviously we disagree. Let's leave it at that.

I'd like to end this with a funny, true story:

And, just as in all pyramid schemes, the first ones in make out like bandits. The last ones lose their shirts. The well-documented first recipient of Social Security, one Ida M. Fuller, contributed a grand total of $24.75 into the scheme. She lived a hundred years, collecting $23,000 for her "investment" of $24.75.

"You see?" the government bandits said. "The system works! Ida M. Fuller's return on investment was astronomical!"
http://www.capitolhillblue.com/node/13625

-t
     
besson3c
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Jan 3, 2009, 09:11 PM
 
turtle: you aren't going to find a system that is "fair" or perfect. Again, it comes down to the question of what you suggest we replace SS, Medicare, and Medicaid with, and what these ramifications will be?

Until these questions are fully answered, and this applies to anybody else as well, this is just you sharing your ideology and preferences with us. This is fine, but it is also simultaneously counter productive.
     
turtle777
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Jan 3, 2009, 09:16 PM
 
Originally Posted by besson3c View Post
turtle: you aren't going to find a system that is "fair" or perfect. Again, it comes down to the question of what you suggest we replace SS, Medicare, and Medicaid with, and what these ramifications will be?

Until these questions are fully answered, and this applies to anybody else as well, this is just you sharing your ideology and preferences with us. This is fine, but it is also simultaneously counter productive.
Dude, you're a broken record.

Easiest fix: tell people that SS will be considered a tax, that there is no entitlement for future benefits, and give them incentives to do their own personal retirement savings.

And honestly, all those people that would not want to take care of themselves and expect the government to nanny them, I got no solution.

You can not implement personal responsibility by creating a government program or policy. Personal responsibility is learned through life experience, which includes hardships.
Unless people feel the impact from their bad choices, they will not change their behavior.

All you are trying is to avoid that it hurts. That will not change anything.

-t
     
besson3c
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Jan 3, 2009, 09:20 PM
 
Originally Posted by turtle777 View Post
Dude, you're a broken record.

Easiest fix: tell people that SS will be considered a tax, that there is no entitlement for future benefits, and give them incentives to do their own personal retirement savings.

And honestly, all those people that would not want to take care of themselves and expect the government to nanny them, I got no solution.

You can not implement personal responsibility by creating a government program or policy. Personal responsibility is learned through life experience, which includes hardships.
Unless people feel the impact from their bad choices, they will not change their behavior.

All you are trying is to avoid that it hurts. That will not change anything.

-t

I'm a broken record because you are evading the question. You only addressed SS here, and you neglected to account for the ramifications of doing what you want, but let's start here...

What do you do about people that make piss poor investment choices and need medical attention in their advanced years? Who pays for this? What about those that can't afford to retire or stay in their homes because their investments crumbled due to their own poor management?

Are you prepared to have to deal with the bad decisions of others?

I'm not saying that what you want to do is wrong, but you really have to deal with the answers to these questions if you want to make an airtight case.
     
turtle777
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Jan 3, 2009, 09:25 PM
 
Originally Posted by besson3c View Post
What do you do about people that make piss poor investment choices and need medical attention in their advanced years? Who pays for this? What about those that can't afford to retire or stay in their homes because their investments crumbled due to their own poor management?
I don't want to pay for it. So my suggestion is: nobody pays.

Of course, you can volunteer, since you seem to be such a big-hearted, wealthy person.

See, thing is, people take risks by making certain choices. If their gamble plays out well, they don't share the spoils. So why would the public pay when their gamble goes wrong ?

Originally Posted by besson3c View Post
Are you prepared to have to deal with the bad decisions of others?
Sure, bring it on.

-t
     
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Jan 3, 2009, 09:32 PM
 
Originally Posted by turtle777 View Post
I don't want to pay for it. So my suggestion is: nobody pays.

Of course, you can volunteer, since you seem to be such a big-hearted, wealthy person.

See, thing is, people take risks by making certain choices. If their gamble plays out well, they don't share the spoils. So why would the public pay when their gamble goes wrong ?


Sure, bring it on.

-t

So, your investor tells you to buy a whole bunch of stock in Lehman Brothers or AIG, and you think "sure, that sounds good, sign me up". The company ends up just as it has, your investments are worthless... What is your message to these people? "Sorry, tough break"?

So, these people get sick, they go to the ER because they don't have health insurance... Who pays for this? They can't afford to stay in their home, what do you do? Do you allow them to go on welfare? Who pays for this?

Whether you like it or not, the outcome and well-being of these people affects you, period. I don't mean emotionally, spiritually, morally, or anything like that - I mean literally, you pay for this. This affects you quite literally.
     
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Jan 3, 2009, 09:38 PM
 
turtle: let's say that same group of people who hypothetically invested in Lehman and are out on their asses decide to turn to crime as a means to make ends meet. Are you prepared to fund more police officers on the streets to protect your family?

How about when these criminals decide to have kids, and they go to the same school as your kids? Statistically speaking the poor have more children... Are you prepared to help pay for these kids when their parents can't? Are you prepared to help pay for the additional resources necessary to get them through school?

Yes, all of this sucks, I hear you loud and clear. However, simply wishing it to go away doesn't make it so. Somebody has to pay, or else you have to deal with the ramifications of not. Every decision has its consequences.
     
turtle777
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Jan 3, 2009, 10:46 PM
 
Originally Posted by besson3c View Post
So, your investor tells you to buy a whole bunch of stock in Lehman Brothers or AIG, and you think "sure, that sounds good, sign me up". The company ends up just as it has, your investments are worthless... What is your message to these people? "Sorry, tough break"?
Absolutely. Is there any other sane option ?

Originally Posted by besson3c View Post
turtle: let's say that same group of people who hypothetically invested in Lehman and are out on their asses decide to turn to crime as a means to make ends meet. Are you prepared to fund more police officers on the streets to protect your family?
Absolutely. Anything else would be giving in to extortion.

Originally Posted by besson3c View Post
How about when these criminals decide to have kids, and they go to the same school as your kids? Statistically speaking the poor have more children... Are you prepared to help pay for these kids when their parents can't? Are you prepared to help pay for the additional resources necessary to get them through school?
Do they have those kids in prison ? I'd think not.

Otherwise, I'd treat the kids according to law. Personal responsibility needs to make a come back.

Originally Posted by besson3c View Post
Yes, all of this sucks, I hear you loud and clear. However, simply wishing it to go away doesn't make it so. Somebody has to pay, or else you have to deal with the ramifications of not. Every decision has its consequences.
So, you just pay your way out of really solving those problems ?

Dude, *I* don't have money to waste on this, especially that paying up won't fix it, but just delay the inevitable.

-t
     
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Jan 3, 2009, 11:15 PM
 
Originally Posted by turtle777 View Post
Absolutely. Is there any other sane option ?
So are you going to answer the question? What do you do about the people that made bad investments? Who pays for this? What happens to these people?

Absolutely. Anything else would be giving in to extortion.
And you're perfectly willing to pay for the increase in law enforcement, hypothetically speaking? I just want to make sure I understand...

I hope you are beginning to see that you can't solve this problem without simply passing off the costs somewhere else. The people affected by these sorts of hypothetically circumstances are not simply going to disappear. There is always a balance to things, no solutions that do not create new problems, and therefore little point in talking about these solutions without also talking about the problems that are created by them.

Again, I'm not even arguing with your solution, just saying that it is incomplete, and mostly just a rhetorical stance in its current state.
     
turtle777
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Jan 3, 2009, 11:22 PM
 
Originally Posted by besson3c View Post
So are you going to answer the question? What do you do about the people that made bad investments? Who pays for this? What happens to these people?
Huh, that wasn't clear ?

NOBODY should pay for people's bad investments. They lose. Period.

Originally Posted by besson3c View Post
And you're perfectly willing to pay for the increase in law enforcement, hypothetically speaking? I just want to make sure I understand...
Of course.

Originally Posted by besson3c View Post
I hope you are beginning to see that you can't solve this problem without simply passing off the costs somewhere else. The people affected by these sorts of hypothetically circumstances are not simply going to disappear. There is always a balance to things, no solutions that do not create new problems, and therefore little point in talking about these solutions without also talking about the problems that are created by them.

Again, I'm not even arguing with your solution, just saying that it is incomplete, and mostly just a rhetorical stance in its current state.
Oh, I see. Sure, I can't offer a "free" solution. Anything done to unwind the mess will cost - real money, and also in terms of lower standard of living.

But there's no point in throwing more good money after a completely broken system.
See, it's not personal, but the way you present it sometimes almost sound like someone who is trying to extort more money out of the system.

-t
     
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Jan 3, 2009, 11:27 PM
 
Originally Posted by turtle777 View Post
Huh, that wasn't clear ?

NOBODY should pay for people's bad investments. They lose. Period.


Of course.


Oh, I see. Sure, I can't offer a "free" solution. Anything done to unwind the mess will cost - real money, and also in terms of lower standard of living.

But there's no point in throwing more good money after a completely broken system.
See, it's not personal, but the way you present it sometimes almost sound like someone who is trying to extort more money out of the system.

-t
I'm glad you get the point I'm making about new problems having to be accounted for, that was all I was trying to say. I'm still not quite clear what you think these solutions would be (other than increasing the size of our police force, which of course creates a whole host of new problems if we really wanted to dissect this), but I'm glad that my point has been recognized.
     
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Jan 4, 2009, 02:25 AM
 
Originally Posted by turtle777 View Post
Well, obviously we disagree. Let's leave it at that.

I'd like to end this with a funny, true story:



http://www.capitolhillblue.com/node/13625

-t
Fair enough, although I have to say the linked article actually points out the flaw in the comparison of SS to a Ponzi scheme.

In a Ponzi scheme, I will only invest if I expect a return on my investment. If I pay in $100, say I expect back $200. So, there have to be 2 investors behind me just to account for me - and that has to grow exponentially for every subsequent investor. Even for a 10% return, there have to be 11 investors behind every 10. That's what makes it unsustainable.

SS makes no such promise on ROI. All it promises is benefits calculated by its formula. If you live long, you probably 'win' in that you collect more benefits than you pay in. Obviously, if you don't live long, most severely if you die before 62 and don't collect any benefits, you 'lose'. Depending on your income and your expected longevity, you may even 'lose' on average. If that's the case, then there doesn't even have to be one whole 'investor' behind you to support you. Yet you invest because you 'have' to. It is sustainable as long as it is managed and adjusted in such a way that 'winners' and 'losers' are balanced.

Now, whatever you think of that arrangement, well, that's up to you.
     
Big Mac  (op)
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Jan 4, 2009, 04:25 AM
 
Not so, CreepDogg.

Take Wikipedia's definition:

"A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit."

A perfect definition of Social Security. The only thing that separates Social Security from any other Ponzi scheme is that Uncle Sam is the ringleader, and he compels you by force to join in. Legalized national fraud - soon we'll all be burned by it.
( Last edited by Big Mac; Jan 4, 2009 at 04:56 AM. )

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Jan 4, 2009, 12:05 PM
 
Originally Posted by Big Mac View Post
Not so, CreepDogg.

Take Wikipedia's definition:

"A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit."

A perfect definition of Social Security. The only thing that separates Social Security from any other Ponzi scheme is that Uncle Sam is the ringleader, and he compels you by force to join in. Legalized national fraud - soon we'll all be burned by it.
Once again, I'll point you to the next paragraph in the Wikipedia definition.

The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.
The difference between that and SS is as I described above.

If you disagree with the concept of SS and don't see any value in it, that's fine. There's no point in arguing that. But it's not a Ponzi scheme.
     
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Originally Posted by CreepDogg View Post
Once again, I'll point you to the next paragraph in the Wikipedia definition.
The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going."
Again, I'll point to Madoff.

He did NOT promise abnormally high short-term returns, and didn't even deliver those.

Yet, there is no question that he ran a Ponzi scheme.
You should recognize that Ponzi schemes vary in some details. But the basic premise, paying out returns with the money of new investors, holds true every time, and holds true for SS as well.

-t
     
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Jan 4, 2009, 07:03 PM
 
Originally Posted by CreepDogg View Post
Once again, I'll point you to the next paragraph in the Wikipedia definition.



The difference between that and SS is as I described above.
One of the statements is an absolute definition: "A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit."

The other is a generalization explaining how people fall for them: "The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors." This is not a requirement, just an observation of how they often work.
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Jan 4, 2009, 07:13 PM
 
Originally Posted by Chuckit View Post
One of the statements is an absolute definition: "A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit."

The other is a generalization explaining how people fall for them: "The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors." This is not a requirement, just an observation of how they often work.
You make an excellent point. By that definition, Social Security is essentially a Ponzi scheme. Without a constant stream of new principle from "investors" (aka taxpayers), it couldn't continue to exist. It's just another angle to show how unbelievably poorly designed and broken the current system really is.
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Jan 4, 2009, 09:10 PM
 
Originally Posted by Chuckit View Post
One of the statements is an absolute definition: "A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit."

The other is a generalization explaining how people fall for them: "The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors." This is not a requirement, just an observation of how they often work.
It's the next sentence that holds the key to the difference.

"The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going."

You could leave out the word 'high' if you like. Point is, any scheme that offers returns in this way is not sustainable because it requires multiple subsequent investors for each current investor - a perpetually increasing flow of money.

SS promises no such returns and does not require a perpetually increasing flow of money.

SS and Ponzi schemes share a particular trait (current 'payers' pay for current 'receivers'), but it's not the trait that makes Ponzi schemes unsustainable, and the comparison is tenuous at best.

Call them one and the same if you like, but IMO it sounds like nothing more than sour grapes and, in the end, undermines your message.
     
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Jan 4, 2009, 09:55 PM
 
If you take into account inflation and an ever-increasing standard of living (and, by extension, increasing cost of living), then yes. Social Security requires an ever-increasing flow of money in order to sustain its current model.

SS started out from the beginning by giving money to people who put nothing into the system. It's gotten exponentially worse over time, as population has increased (which then increases the number of retirees).

However, whether or not it's a Ponzi scheme is pretty irrelevant, IMO - no matter what terminology you want to use to describe it, it's a terribly designed, broken system that is going to sink this country into bankruptcy if we don't do something about it now.
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Jan 4, 2009, 10:57 PM
 
When do we need to do something about it?

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Jan 4, 2009, 11:55 PM
 
Originally Posted by CreepDogg View Post
It's the next sentence that holds the key to the difference.

"The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going."

[...]

SS promises no such returns and does not require a perpetually increasing flow of money.
Wrong. Just because it's in Wiki doesn't make it right.

The part of "ever increasing" is not necessarily right, at least not in the mid run. It's ok to be steady for a while, and maybe even pay diminishing returns.

The thing with SS is, we will never know, because the system will not easily blow up when underfunded, because the government can always print more money and pretend like everything is ok.

In a sense, SS is the mother of all Ponzi schemes, because the person who pays out the returns can also print money.

-t
     
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Jan 5, 2009, 12:10 AM
 
Originally Posted by turtle777 View Post
Wrong. Just because it's in Wiki doesn't make it right.

The part of "ever increasing" is not necessarily right, at least not in the mid run. It's ok to be steady for a while, and maybe even pay diminishing returns.
Hey, you pulled out the link to the Wiki definition, not me.

The part about 'ever increasing' is exactly what makes such a scheme unsustainable, and gives the term its meaning. If you want to design a scheme with diminishing returns, be my guest. Good luck finding investors.
     
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Jan 5, 2009, 12:31 AM
 
Originally Posted by CreepDogg View Post
Hey, you pulled out the link to the Wiki definition, not me.
Never said it's the bible.

Originally Posted by CreepDogg View Post
The part about 'ever increasing' is exactly what makes such a scheme unsustainable, and gives the term its meaning. If you want to design a scheme with diminishing returns, be my guest. Good luck finding investors.
No, you disregarded my qualifier "mid run". Again, I think you have a too narrow and extreme view of Ponzi schemes. Madoff is a good example of one that does not exhibit those extremes.

-t
     
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Jan 5, 2009, 12:47 AM
 
Originally Posted by turtle777 View Post
No, you disregarded my qualifier "mid run". Again, I think you have a too narrow and extreme view of Ponzi schemes. Madoff is a good example of one that does not exhibit those extremes.
Well, I just think that the commonly understood primary trait of a Ponzi scheme is its inherent unsustainability in that by design, it will eventually crash upon itself. Short run, mid run, long run, it doesn't matter. If that's too narrow for you, so be it. We'll just have to agree to disagree.
     
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Jan 5, 2009, 06:16 AM
 
Originally Posted by turtle777 View Post
So, given that the US is basically broke, entangled in the Greatest Ponzi scheme of all times (Social Security), and the Fed keeps printing money like there's no tomorrow.

When do you guys think will the run on the US $ start ?

All those foreign creditors and investors will wake up some day stop believing the lies our government is putting out about the brilliant future we have. They will start demanding their money back, which we can't, because we spent it on useless consumption and gave them basically IOUs.

Welcome to hyperinflation and stagnation.

It's gonna be an awful rough ride, once this whole scheme starts to fall apart.

-t
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Jan 5, 2009, 03:36 PM
 
The one thing I like about Obama's recovery plan is the emphasis on job creation. The way I see it, job creation is always better than an outright bail out. Investing in roads, schools, and other infrastructure is even better than tax cuts, as with the recipients of tax cuts money is saved, rather than put back into stimulating the economy (the desired effect). When you can devise programs that result in having more people working and fewer unemployed, you get the same effect as an economic stimulus package, except you also get something out of if it (i.e. better roads, schools, etc.)
     
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Jan 5, 2009, 03:40 PM
 
The problem with the infrastructure stimulus is that it doesn't help battling our trade deficit.

We need to stimulate the manufacturing industries, so we can make products and sell them to the world. And no, Detroit 3 don't qualify, because nobody overseas wants to buy that crap.

-t
     
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Jan 5, 2009, 04:37 PM
 
Originally Posted by shifuimam View Post
The war amounts for less than three percent of our $8.x trillion national deficit. It's really not as big of a spending drain as the left wants you to believe.
Nearly 3% of 8.x trillion is still an absolutely huge amount. It's bigger than the right wants you to believe.

Originally Posted by shifuimam View Post
Social Security and Medicare are two social programs that are already broken and are now facing a tsunami wave of Baby Boomers retiring in the next decade or so.
It works in principal. Why don't we stop the government from borrowing against social security and medicare so it will work properly.

Originally Posted by shifuimam View Post
When you look at where we are today, Big Mac is absolutely right - our culture of immediate satisfaction, entitlement, and rampant consumerism is more to blame than anything else for the current state of the economy.
Speculation is to blame for the current state of the economy.

Originally Posted by shifuimam View Post
The subprime mortgage meltdown that started in 2006 goes directly back to providing mortgages to people who couldn't afford them and had no business having them.
Wrong. Subprime mortgages wouldn't have even been a possibility if lenders hadn't been deregulated and removed of oversight. You can't expect lenders to not take advantage of people. With housing prices skyrocketing as much as 20% a year, who cares if someone can't pay the loan? Let it foreclose, wait 3 months, then sell the house at a profit anyway.

You can make any loan work for nearly any person with any kind of reasonable income. The bank will still make the same amount of money as any other loan, it'll just take longer. Greedy and impatient executives and investors provided completely ridiculous loan terms based on speculation and investment on future value of homes.

It all comes back to the speculators be it real estate, stock market, or gas prices. Unreasonable expectations of what the future will provide so criminals in the higher echelon of things will get more money.

Originally Posted by shifuimam View Post
You look at this ridiculous auto bailout, and it points back to union blackmailing (no business can afford to provide lifetime health care coverage to its employees forever) and dealership regulations that prevent them from shutting down some of the independent dealerships across the country. Yes, the Big Three's general direction and business model hasn't been able to compete with Asia's auto industry for years, but the fact is that the UAW has managed to force the American industry into checks they simply can't cash anymore.
Complete and utter bullcrap. It was gross incompetence by the Big Three executives, plain and simple. They refused to change with the market because it gave them more money in the short run. They were advertising and pushing SUVs, large pickups, and other premium gas guzzlers in a obviously changing market. No one was complaining about the UAW when the Big Three were rolling in money during the SUV boom. Now it's suddenly the UAW's fault because the Big Three are only now starting to produce competitive fuel efficient vehicles.

You know what would happen if the UAW didn't exist? The Big Three would still be going bankrupt and begging for money from their private jets and yachts.

Originally Posted by shifuimam View Post
Nobody wants to talk about giving up the freebies to which they've become so accustomed. Nobody wants to admit that unions allow large groups of employees to bully and blackmail corporations into providing asinine benefits that can't be financially sustained in the long term.
Because it isn't true.

Originally Posted by shifuimam View Post
Nobody wants to talk about the fact that Social Security is bankrupt, and it's only going to get worse.
They talk about it every election year, then nothing happens.

Originally Posted by shifuimam View Post
If a candidate started talking about cutting back Social Security and Medicare, you can be guaranteed they wouldn't have a chance in hell of getting elected, because Americans have gotten too used to expecting handouts from the government.
It's not the cutting back, it's the prevention of borrowing against. If Social Security was actually allowed to mature the way it's supposed to, it wouldn't be a problem.

Originally Posted by shifuimam View Post
When you stop and think about it, the government shouldn't be responsible for your personal retirement. Wouldn't it be much nicer if you were allowed to take the hundreds of thousands of dollars you've dumped into that system over your lifetime and invest it in your own retirement, rather than paying for someone else's life?
Almost everyone would have lost their retirement right now if they had it your way. The stock market needs as much (or more) overhaul as Social Security. Flat out crooks are running the stock market. How is it safe to invest your money in the market right now with criminals basically just stealing it all?

Don't get me wrong, I support an opt-in program for personal management of retirement. I'm just saying that getting rid of Social Security is removing a safety net for people. Every single person looking to retire right now who isn't on social security is screwed.

Originally Posted by shifuimam View Post
What's one reason why public schools fail in some areas? Lack of funding for adequate staffing. A teacher trying to manage 30 fourth-graders is less likely to be able to give each of them individual attention, so kids slip through the cracks, get pushed through the education system, and graduate without being able to even read or perform basic arithmetic. What's the solution? More money? No. Obviously, smaller classrooms historically provide a better learning environment and allow teachers to focus more on students with learning problems.
Geeze, why didn't schools think of that. They don't need money, just smaller classrooms ... ... So, how exactly do you hire more teachers and build more facilities without more money? If you make the classes twice as small, you're going to need twice as many teachers and twice as many buildings. The reason why there are 30 students in a class is because education and social services are the very first thing that get cut in nearly every state. They are severely underfunded.

Originally Posted by shifuimam View Post
There are more than three hundred million people in the United States. It's utterly ridiculous to think that the federal government can manage to hold the hand of each individual citizen and ensure each citizen's personal happiness and well-being. Too many people exploit the system, too many people fall through the cracks, and forty or fifty years after implementing what seemed like a genius system (Social Security), we're facing a major financial crisis because of it.
Not because of Social Security, but because Democratic and especially Republican administrations love to borrow money from it. Don't allow them to borrow from it!
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Jan 6, 2009, 09:44 AM
 
Originally Posted by shifuimam View Post
It's not like I'm sitting in some office doing nothing all the time.

[…]

I've only been working at this job since April, so don't get on a high horse about how I have no room to talk. It doesn't matter where you work - the majority of Americans believe that they are entitled to certain concessions, and that the government should provide those concessions at taxpayer expense.

We are not a bunch of lazy fsck-offs at my university. Full-time hourly employees have to work forty hours a week, just like any other business. Full-time salaried employees are expected to work enough hours to complete their work, just like any other business. I work eight hours or more every single day.
It seems to me that you are in the minority, then.

Most civil servants don’t work hard, or much. Take job centres, for instance: Thousands upon thousands of people being paid for not finding people jobs and being condescending on top of it. Take local council employees: Useless at one job, they don’t get sacked, they get shuffled around to some other department. They continue to suck, they are given a position in yet another department. Take the police: Since they rarely solve any crimes or actually protect anybody from anything, thousands upon thousands of them spend their days driving around in circles, eating doughnuts and drinking coffee. You phone up the station, nobody ever has any time because they’re all either doing that, or doing paperwork. You rise up high enough in the civil service, your reward is that you do absolutely nothing, except attend dinners and give speeches. I consider that tax money wasted.

Do you know why I work in the public sector? Because I couldn't find a job as a web developer anywhere else. As I already said, this is because of excessive outsourcing, and it's a bad thing. Yes, my job is funded by taxpayers (although more of it is funded by the university budget, which comes from tuition dollars), but you know what? It's actually really nice to know that I'm getting a little bit of my own tax dollars back in my paycheck every month. It's at least something.
Stealing back your taxes from the government, I can appreciate that. Taxation is theft, people should try to reclaim as much as they can of the taxes that have been stolen from them and their ancestors. You do through working a subsidised job, others do it through claiming benefits, yet others do it through tax avoidance. Same difference. If nobody ever paid any taxes, they wouldn’t have the right to expect anything from the state. Since everybody does pay taxes, explicit and stealth both (low income earners being hit hardest), however, they do indeed feel entitled to get as much out of it in return. And why not, I say.

I'm aware that sometimes, people need a helping hand. I am perfectly fine with programs that provide short-term help. I am not, however, okay with programs that allow people to subsist on government handouts and money permanently.
Maybe you should be okay with it. From an unselfish perspective, that is the ideal. Every resident of a country is provided with enough money to live comfortably and securely, whatever they make from whatever work or art they should wish to do on top of that is a bonus. It’s not even farfetched or unrealistic: Think about that permanent fund dividends system they have in Alaska, for instance, you wouldn’t say there was anything wrong with that, would you? Think about the National Health Service in Britain, maybe it isn’t the greatest health care system in the world, but at least it’s universal. Scotland I believe manages to provide free education throughout university for Scots, they have also scrapped council tax and replaced it with a means-tested system. Think about ideas like The RICH Economy, and consider how much lucre the wealthiest people in your country are hoarding, that could be distributed instead. People could do more than subsist. The work ethic is obsolete.

Look at the subprime mortgage meltdown, and the domino effect it caused with "normal" mortgages - it all comes directly back to people feeling as though they are entitled to home ownership, which results in citizens purchasing homes they cannot, by any stretch of the imagination, legitimately afford.

Look at how much credit card debt your average adult is carrying around. Why? Because they feel entitled to own nice things. They think that they have a right to own a 60" TV or a jacuzzi or a new car every three years.
If you get right down to it, the root cause of that isn’t an entitlement culture, it is a banking system based upon debt rather than assets. The banks want people to run up excessive debts, that is wherein their profit originates.

Broke people want houses.
Assuming there are enough houses around, what’s the problem? Surely, it is better for houses to be occupied than for tens of thousands of them to stand empty, isn’t it?

The liberal left generally operates under the concept that humans are inherently good and unselfish, whereas history as far back as we know it shows the complete opposite.
Are you saying that the government should respect people’s evil and selfish essences?

It seems to me that if you design the environment in a way that shows people there is benefit in treating poorer or non-working people as if they were good and entitled to decent treatment, you end up with a more harmonious system than if you encouraged the belief that they were selfish and evil. If everyone is assumed to be evil, this suggests the need for massive social programmes, unless you want the most evil and selfish people to succeed.

Perhaps it is the dog-eat-dog system that encourages people to be bad and selfish. The most selfish, least good person comes out on top. Hence, arguably, the present malaise.
     
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Jan 6, 2009, 12:48 PM
 


-t
     
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Jan 6, 2009, 12:56 PM
 
Originally Posted by turtle777 View Post


-t
If we can't pay, does that mean that China goes under, and we bail them out?
     
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Jan 6, 2009, 03:54 PM
 
So, according to the logic, if the SS is a Ponzi scheme, then any purchase of insurance is also, as the money you are putting into the scheme now is being used to pay current claims. And I guess the same goes for banks—your deposits are used to pay interest.

So maybe Ponzi schemes are all OK then—except for the fraudulent ones (and wasn't fraudulence of of the conditions of being a Ponzi scheme?)
     
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Jan 6, 2009, 07:18 PM
 
You nailed it, PER3! Crazy how the thinking is around here, huh
     
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Jan 6, 2009, 07:18 PM
 
Originally Posted by PER3 View Post
So, according to the logic, if the SS is a Ponzi scheme, then any purchase of insurance is also, as the money you are putting into the scheme now is being used to pay current claims. And I guess the same goes for banks—your deposits are used to pay interest.

So maybe Ponzi schemes are all OK then—except for the fraudulent ones (and wasn't fraudulence of of the conditions of being a Ponzi scheme?)
Insurance actuaries are used to determine a risk factor to premiums collected. Most are paying into a system that they're not drawing on with the promise that should they need it-it is available, premiums and surpluses are invested, and used to pay out new claims to those who need it. A ponzi scheme is not sustainable, an insurance scheme generally is.

Entirely different situation as the premiums collected in an insurance scheme are called "consideration" for "services rendered" unlike a ponzi scheme. A ponzi scheme uses the money invested as the only commodity and is not consideration for anything except an empty promise. Insurance companies also experience much more oversight than a simple investment entity.
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Jan 6, 2009, 07:19 PM
 
AIG had EXTENSIVE oversight...
     
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Originally Posted by stumblinmike View Post
AIG had EXTENSIVE oversight...
Yep, the government was ALL OVER the credit-default swaps!
ebuddy
     
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Jan 6, 2009, 10:51 PM
 
Originally Posted by PER3 View Post
So, according to the logic, if the SS is a Ponzi scheme, then any purchase of insurance is also, as the money you are putting into the scheme now is being used to pay current claims.
OMGWTFBBQ ?

Are you one of those misguided clowns that think an insurance is an investment ?

-t
     
Big Mac  (op)
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Jan 11, 2009, 09:26 AM
 
And besides that, Social Security is not insurance, although there are some similarities. Insurance protects one from certain defined, unexpected, insurable risks. An insurable risk has certain characteristics that are well defined by insurance regulation. Examples of insurable risks are untimely death, unexpected illness, unexpected property damage (fire, flood, accident, earthquake), etc. Getting older is not an insurable risk because it's an expected eventuality of life that will occur to all of us unless the unexpected interruption of our lives (i.e. untimely death) occurs instead, which we buy life insurance to protect against. One should never be compelled to buy insurance, but one is forced into paying for Social Security whether one likes it or not with the exception of the lucky groups in America fortunate enough to have been made exempt from it, like government employees (conveniently, they don't have to be subjected to their own "wonderful" Socialist programs while the rest of the citizenry is forced into them). If Social Security were provided in the open market under the name insurance and the same rules applied to it, it would probably be rated one of the worst types of insurance available since it's demographically (and therefore financially) unsound and since the "company" providing it raids the excess of funds paid in yearly in order to try to make their budgets look more balanced than they truly are.

And actually, certain types of insurance can be thought of as investments. Whole life insurance, for example, creates an "instant estate" that is guaranteed to exist upon death as long as the premiums are paid and loans aren't taken out against its face value. As for Medicare, it may be thought of as involuntary health insurance, and it's also the most potent antidote to calls for Socializing medicine completely in America because it's the biggest financial mess and ticking time bomb out there.

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