Your Questions About Is The Stock Market A Ponzi Scheme

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Charles asks…

What are the arguments for and against the privatization of social security?

I want to learn more so I can form an opinion.

Justin answers:

For:
That people should be able to decide to be able to decide how to invest their money, and that they may end up better off, and that supposedly on average the stock market will give better performance

Against:
Defeats the point of social security as there is chance someone will make a bad investment and will have to go on welfare, leaving the government holding the bag.
Also if the market crashes or a sector crashes, like it did during the recent GFC, or like in the 80’s during the Savings and & Loans scandal, or the IT bust in the 90’s, or the oil crisis in the 70’s, or if the market just doesn’t do that well, then again the government is left holding everyone’s bag.

Edit:
Samantha, that is such a load,
1. The only reason why it doesn’t work in America is because people like you think you are not obliged to pay taxes. It works perfectly well in virtually every other country, and no country in the world has ever successfully privatised social security to the extent that it is proposed in America.
2. What you are quoting are PROJECTIONS made by ideological think tanks that idealise all of the upsides of privatising, assuming that there is fantastic growth in the market and plugging in ludicrously high and stable return on investments and that everyone will manage to invest their money that well etc etc, essentially assuming an unending stockmarket boom (like in the 90’s before the crash) and minimising, if not ignoring stock crashes, ponzi schemes etc.

Edit
1. Samantha, again social security works in every other country
2. Up 8000% over what 85 years isn’t that impressive, the economy grows and everyone is better off, not just the stock markets, and again those projections of who will be better off are pure speculation.
3. How much we choose to pay out to social security is a matter of policy, and we could decide to give more money to retirees if we raised taxes or cut spending, the fact of the matter is, we choose to give our retirees less simply as a matter of economic convienience
4. Voodoo economics in the real sense of the word, money isn’t an a bunch of numbers in an account, it is a measure of resources and products and knowledge created, and it is rather a delusional cultural zietgeist that people believe money is magically created by shuffling it around differently. If nothing is created, then a reshuffle will always have winners and losers, and guess what the average investor is?
5. Do you think that “Average performance” applies to everyone? Not everyone is an investment banker, and you are naive to think that an average investor will get those returns, the average person will either not invest their money well or be gouged by financial service fees

Richard asks…

How US subprime mortgage have led to the present world-wide financial downturn?

Hey guys, I’m still confused about how defaults in US subprime mortgage have led to the present world-wide financial downturn?

Justin answers:

The same thing that happened in 1929 has happened in 2009 (some would say sooner and they’d be right) Speculation on something that was either value less or no money behind it. (same-thing) Everyone seems to have a complicated explanation of it but it is really quite simple.The stock market crash came as a result of people not making their margin calls on stocks that were only funded at 10% of value but could be paid off with the proceeds of the stock when the price went higher, assuming you would actually sell it then.When it became there was no REAL money in it people refused to make their margin calls and then others couldn’t. Then everyone said screw it and got out and since everyone was a part of it they knew there wasn’t enough money in the banks to fund this mess so there was a run on the banks with no money for loans or payroll everyone was out of work Now to the present day.A lot of loans were based on the ridiculous notion that there would be no end in site for increasing home values and subsequent equity available to treat your home’s inflated value’s equity like an ATM cash machine.These loans had high fees for people with sub par credit and teaser rate interest ARMS that ballooned into payments no one could afford. These junk loans were passed around like a hot potato all over the world in a scummy scam scheme called “derivatives” of which this glorified Ponzi scheme was cooked up by a mathematician’s invented algorithm (That part being the part no one understands,but I do –It’s a veiled attempt to cover up ill gotten greedy gains) The “house of cards fell down when major players were stuck with these worthless securities they couldn’t find anyone any longer to pawn them off on. So write them off–whoops if we do that our reserves are gone and so are we. The players in this game were so huge and connected over the whole international banking system that it really had the potential of putting the whole world financial system to its knees. They said It’s your mess, you started it, it behooves you to end it. Can you blame them? Hence the bailouts. Were backed against the wall–world wide banking collapse–or.

Mark asks…

Does the natural world have anything equivalent to endless economic growth or compound interest?

Methinks the grow-forever Ponzi scheme is coming to an end sooner than most people realize.

As goes cheap oil, so goes growthism.

http://www.energybulletin.net/primer

Justin answers:

Good questions.

I would imagine the population of any insect, bacteria, algae or even animal would grow exponentially (like compound interest) if there was an unlimited amount of food and space.

I think your point is that the algae eventually reaches the edge of the pool, or the bacteria runs out of food and that perpetual growth is impossible, just like perpetual growth of the economy is impossible.

You may find this article interesting. It talks about that argument as regards the stock market.

Http://pmanion.blogspot.com/2009/08/world-stock-market-what-return-should-i.html

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