I, Pencil, The Movie

[astonas]

Re: I, Pencil, The Movie

Greece gave lifetime pensions to some as early as 45 and 50 years old. Daughters of deceased army officers could receive lifetime pensions if they remained unmarried.

In additional there was massive tax evasion, and well as excessive corruption. It part of the culture of a good portion of the population.

A you want to blame it all on bankers?

http://www.theguardian.com/business/...bt-crisis-jobs

I think anyone who has read my writings here on the subject of Greece, and Europe, will understand that I don't view the circumstances there nearly so simplistically. I have from the beginning argued that there was local corruption as well, and discussed numerous specific examples of it.

Furthermore, I think just reading what I actually wrote above reveals that position pretty clearly. Here's my paragraph again, for reference:

Really? We're going to blame "socialism" for Greece, instead of parasitic international banking practices combined with local corruption?

(emphasis added here)

It doesn't appear at all vague to me.

I had clearly summarized the TWO dominant factors, both very complex and discussed in exhaustive detail previously, that came together to make the crisis. I NEVER asserted that it was "all bankers" and have discussed the disparate monetary cultures of Europe in detail over literally hundreds of posts!

If one can't make a point without lying about a conversation partner's position, it forces the reader to question whether one had any valid point to contribute in the first place.


But in any event, it is simply ridiculous to imply that corruption is special to socialism. Corruption stems from a HUMAN desire to twist whatever system is in place, and thereby maximize one's personal benefit. That's why it happens (and must be guarded against) everywhere, regardless of the political theory a system is built around. Here in our US democracy we had TARP bailouts of a "capitalist" banking system. But to say that this was the fault of some theoretical universal "capitalism" or "democracy" is ridiculous. The most one could say is that it stemmed from a specific implementation of capitalism or democracy, which had previously been corrupted to benefit a very small set of people.

Such travesties come from corruption, and that is universally possible. The myth that it needs a "big" state to happen is ludicrous. One can make a government more corrupt by shrinking it as easily as one can make it more corrupt by growing it. One simply eliminates oversight that restricts oneself, and leaves in place that which restricts others. There is no difference between "growing" and "shrinking" a government in terms of the potential for corruption. Any unbalanced system is detrimental, and it doesn't need to be big to be economically devastating. (Feudalism, anyone? No social spending there!)

Corruption, as it stems from a universal human drive, is best mapped on an axis orthogonal to the political spectrum. There are corrupt people on the left. There are corrupt people on the right. There are people with integrity on the left. There are people with integrity on the right.

And one can find people with no integrity (for example, willing to lie about what the other side is saying) on all points of the political spectrum, and even here on iTulip.


What matters is not "big" or "small" government, but effective government. Those who obsess about either "big" or "small" government are simply not addressing the real problems of this nation at all. They are choosing (because it IS a choice to buy into left/right identity politics instead of thinking for oneself) to be a mindless pawn in somebody else's game. "Sheeple" seems to be the popular phrase for such people at this time.

It is by now obvious that my resolve is imperfect on this point, but I do my best not to engage with such worldviews directly here. There is very little point to it. An opinion that is based on identity rather than facts can't be swayed by any reasoned discussion. One might as well pound one's head into a brick wall.

[Woodsman]

Re: Groundhog Day

here we go again...

[vt]

Re: I, Pencil, The Movie

Astonas,

I fully agree with just about all you have written here. Socialism and free markets can be very efficient as well as not corrupt. There is corruption in the private and public sectors as times and the opposite at others.

The question I had about your comment is that while there was certainly corruption in Greece, there was also a degree of socialism carried to extremes with pension policies. I am very much in favor of social security in America and various reasonable pension systems. I feel that 401K plans do provide the potential of more retirement security and the ability for the middle class to pass on unused assets.

My only question about your comment was parasitic bankers with regards to Greece. I fully agree that bankers have been parasitic in a huge number of areas. But Greece is a different area.

My reading is that Greece conspired with Goldman (they are clearly parasitic!) to fudge their numbers to join the Euro. So yes that is parasitic. But the Greek leadership and citizens knew that they were taking steps that were not above board. Greece, Portugal, and Spain has a history of going bankrupt. Is that because of parasitic bankers?

Banks of major European nations lent money to Greece that was clearly misused under false economic pretenses. Corruption in Greece combined with tax evasion, a bloated public sector, unworkable pensions, and corruption lead to their demise. Other than Goldman's initial illegal actions, I don't see the banks at fault in this aprticular instance.

The banks and corrupt public and private officials are clearly at fault in many other examples.

[shiny!]

Re: I, Pencil, The Movie

The question I had about your comment is that while there was certainly corruption in Greece, there was also a degree of socialism carried to extremes with pension policies. I am very much in favor of social security in America and various reasonable pension systems. I feel that 401K plans do provide the potential of more retirement security and the ability for the middle class to pass on unused assets.

Not to burst your bubble but 401(k) plans have had 30 years to prove their potential; for most Americans they have failed spectacularly. Except for the financial sector which they've enriched quite nicely. The 401(k) is now largely considered a failed experiment.

For millions, 401(k) plans have fallen short
Kelley Holland | @KKelleyHolland
Monday, 23 Mar 2015 | 7:00 AM ET

You need to know this number: $18,433.

That's the median amount in a 401(k) savings account, according to a recent report by the Employee Benefit Research Institute. Almost 40 percent of employees have less than $10,000, even as the proportion of companies offering alternatives like defined benefit pensions continues to drop.

Older workers do tend to have more savings. At Vanguard, for example, the median for savers aged 55 to 64 in 2013 was $76,381. But even at that level, millions of workers nearing retirement are on track to leave the workforce with savings that do not even approach what they will need for health care, let alone daily living. Not surprisingly, retirement is now Americans' top financial worry, according to a recent Gallup poll.

To be sure, tax-advantaged 401(k) plans have provided a means for millions of retirement savers to build a nest egg. More than three-quarters of employers use such defined contribution plans as the main retirement income plan option for employees, and the vast majority of them offer matching contribution programs, which further enhance employees' ability to accumulate wealth.

But shifting the responsibility for growing retirement income from employers to individuals has proved problematic for many American workers, particularly in the face of wage stagnation and a lack of investment expertise. For them, the grand 401(k) experiment has been a failure.

"In America, when we had disability and defined benefit plans, you actually had an equality of retirement period. Now the rich can retire and workers have to work until they die," said Teresa Ghilarducci, a labor economist at the New School for Social Research who has proposed eliminating the tax breaks for 401(k)s and using the money saved to create government-run retirement plans.
A historical accident?

It wasn't supposed to work out this way.

The 401(k) account came into being quietly, as a clause in the Revenue Act of 1978. The clause said employees could choose to defer some compensation until retirement, and they would not be taxed until that time. (Companies had long offered deferred compensation arrangements, but employers and the IRS had been going back and forth about their tax treatment.)

"401(k)s were never designed as the nation's primary retirement system," said Anthony Webb, a research economist at the Center for Retirement Research. "They came to be that as a historical accident."

History has it that a benefits consultant named Ted Benna realized the provision could be used as a retirement savings vehicle for all employees. In 1981, the IRS clarified that 401(k) plan participants could defer regular wages, not just bonuses, and the plans began to proliferate.

By 1985, there were 30,000 401(k) plans in existence, and 10 years later that figure topped 200,000. As of 2013, there were 638,000 plans in place with 89 million participants, according to the Investment Company Institute. And assets in defined contribution plans totaled $6.6 trillion as of the third quarter of 2014, $4.5 trillion of which was held in 401(k) plans.

"Nobody thought they were going to take over the world," said Daniel Halperin, a professor at Harvard Law School. who was a senior official at the Treasury Department when 401(k) accounts came into being.
Rise of defined contributions

But a funny thing happened as 401(k) plans began to multiply: defined benefit plans started disappearing. In 1985, the year there were 30,000 401(k) plans, defined benefit plans numbered 170,000, according to the Investment Company Institute. By 2005, there were just 41,000 defined benefit plans–and 417,000 401(k) plans.

The reasons for the shift are complex, but Ghilarducci argued that in the early years, "workers overvalued the promise of a 401(k)" and the prospect of amassing investment wealth, so they accepted the change. Meanwhile, companies found that providing a defined contribution, or DC, plan cost them less. (Ghilarducci studied 700 companies' plans over 17 years and found that when employers allocated a larger share of their pension expenditures to defined contribution plans, their overall spending on pension plans went down.)

But the new plans had two key differences. Participation in 401(k) plans is optional and, while pensions provided lifetime income, 401(k) plans offer no such certainty.

"I'm not saying defined benefit plans are flawless, but they certainly didn't put as much of the risk and responsibility on the individual," said Terrance Odean, a professor of finance at the University of California, Berkeley's Haas School of Business.
Early signs of trouble

That concept may not have been in the forefront of employees' minds at the start, but problems with 401(k)s surfaced early.

For one thing, employee participation in 401(k) plans never became anywhere near universal, despite aggressive marketing by investment firms and exhortations by employers and consumer associations to save more. A 2011 report by the Government Accountability Office found that "the percentage of workers participating in employer-sponsored plans has peaked at about 50 percent of the private sector workforce for most of the past two decades."

The employees who did participate tended to be better paid, since those people could defer income more easily. The GAO report found that most of the people contributing as much as they were allowed tended to have incomes of $126,000 or more.

In part, that is because the ascent of 401(k) plans came as college costs started their steep rise, hitting many employees in their prime earning years. Stagnating middle-class wages also made it hard for people to save.

Fees have been another problem. Webb has studied 401(k) fees, and he concluded that "as a result of high fees, fund balances in defined contribution plans are about 20 percent less than they need otherwise be."

The Department of Labor in 2012 established new rules requiring more disclosure of fees, but it faced strong industry opposition, including a 17-page comment from the Investment Company Institute.
Failure of choice

Most employees also turned out to be less than terrific investors, making mistakes like selling low and buying high or shying away from optimal asset classes at the wrong time.

Berkeley's Odean and others have studied the effect of investment choice on 401(k) savers, and found that when investors choose their asset class allocation, a retirement income shortfall is more likely. If they can also choose their stock investments, the odds of a shortfall rise further.

"401(k)'s changed two things: you could choose not to participate, and you chose your own investments, which a lot of people, I think, screw up," Halperin said.

Benna, who is often called the father of the 401(k), has argued that many plans offer far too many choices. " If I were starting over from scratch today with what we know, I'd blow up the existing structure and start over," he said in a 2013 interview.

Another problem is that when 401(k) savers retire, they often opt to take their savings in a lump sum and roll the money into IRAs, which may entail higher fees and expose them to conflicted investment advice. A recent report by the Council of Economic Advisors found that savers receiving such advice, which may be suitable for them but not optimal, see investment returns reduced by a full percentage point, on average. Overall, the report found that conflicted investment advice costs savers $17 billion every year.

The result of all these shortcomings? Some 52 percent of American households were at risk of being unable to maintain their standard of living as of 2013, a figure barely changed from a year earlier—even though a strong bull market should have pushed savings higher and the government gives up billions in tax revenue to subsidize the plans.

In a hearing last September on retirement security, Sen. Ron Wyden, D-Ore., declared that "something is out of whack. The American taxpayer delivers $140 billion each year to subsidize retirement accounts, but still millions of Americans nearing retirement have little or nothing saved."
Retirement worries rise

As problems mount with 401(k)s, Americans' worries about retirement security are intensifying.

A 2014 Harris poll found that 74 percent of Americans were worried about having enough income in retirement, and in a survey published recently by the National Institute on Retirement Security, 86 percent of respondents agree that the country is facing a retirement crisis, with that opinion strongest among high earners.

Changes may come, but for now, 401(k) plans and their ilk remain Americans' predominant workplace retirement savings vehicle. They may be a historical accident, but for the millions of people now facing a potentially impoverished retirement, the fallout is grave indeed.

As a former Treasury official, Halperin witnessed the creation of 401(k) accounts, But, "on balance, I don't think it was a big plus" that the accounts were created, he said. "I don't take credit for it. I try to avoid the blame."

[vt]

Re: I, Pencil, The Movie

Wall Street should not have been allowed to be a part. Something like the Wilshire 5000 index or Vanguard Total Stock Market Index would have been an extremely low cost vehicle.

The second problem was to let individuals make changes instead of just letting it grow. Fear and Greed are powerful emotions.

Even with two major bear markets the Vanguard Total Stock Market Index has gone from a hypothetical $10K to $78K since 1992. Past performance doesn't mean it will keep going, of course. No one knows what the next few years will do.

Maybe social security should have been a balanced fund instead of the Ponzi scheme we have now.