Hardy641 Posted February 10, 2009 Report Share Posted February 10, 2009 Spot on! The money never existed in the first place. It was all virtual. While the â??real worldâ?? of course exists its valuation wasnâ??t real at all. It took many years to build this bubble but just a few months to blow it. Many people became virtual millionaires or even billionaires but if they havenâ??t materialized their wins in time they are likely to be gone by now. It will be a hard wakeup call for all who planned their retirement on steady rising stocks, bonds, funds, derivates or other investment instruments. E.g. if a 60+ year planned to have 1 million USD at the age of retirement and achieved his goal in 2007, in 2009 he is lucky to have half with virtually no chance to recover the losses in his working lifespan. The impacts on society will be tremendous and I have no clue how many are affected and how bad it will become. An ageing and declining population in most first world economies doesnâ??t help either. Link to comment Share on other sites More sharing options...
kamui Posted February 10, 2009 Report Share Posted February 10, 2009 SE.g. if a 60+ year planned to have 1 million USD at the age of retirement and achieved his goal in 2007, in 2009 he is lucky to have half with virtually no chance to recover the losses in his working lifespan. The impacts on society will be tremendous and I have no clue how many are affected and how bad it will become. An aging and declining population in most first world economies doesnâ??t help either. Are there any other countries besides the USA were people tried to finance major parts of their retirement money via the stock market? In Germany it isn't certainly so, since the the Germans never trusted the stock market. Luckily we had a small crash (German Post) a few years ago which proved the mistrust correct and most blue and white collar workers moved to more secure financial products which 100% guarantee a base retirement payment. In Europe and Japan most social security and retirement accounts are state controlled, therefore most life savings are secure for the next years - but maybe not for the next decades, because of change of the demographic structure (aging societies). It might sound a little bit cynical, but the stock market crash happened just in time for Germany. German free market politicians, of course the financial industries, connected media and lobby groups were putting a lot of pressure on the government and the people to privatize social security and retirement savings and to finance large parts of it via the stock market... Link to comment Share on other sites More sharing options...
Mentors Posted February 10, 2009 Report Share Posted February 10, 2009 in Switzerland, parts of social security's, even state controlled, are invested in the stock market. They suffer under big losses now. Link to comment Share on other sites More sharing options...
cavanami Posted February 10, 2009 Report Share Posted February 10, 2009 In the USA, kept "secret" from the US citizen, the US gov already owns a lot of stock in companies! If one were to get the CAFR (Comprehensive Annual Financial Report) from any state in the USA, they would see a HUGE surplus of $$$, all the while the butt wad US pols cry poor mouth...can you say, lying mama farkin US politician? I farkin can!!! Link to comment Share on other sites More sharing options...
Hardy641 Posted February 10, 2009 Report Share Posted February 10, 2009 Even in Germany I believe that private and corporate pension funds invest in the stock market, bonds, funds... Only the official government pension doesn't. However, I would not trust this either as it is based on the so called generation contract. Germany's population is aging and declining. Just another kind of Ponzi scheme. This ones collapses when there are not enough kids - which exactly is happening the last 20 years with no change in sight. Link to comment Share on other sites More sharing options...
kamui Posted February 10, 2009 Report Share Posted February 10, 2009 Even in Germany I believe that private and corporate pension funds invest in the stock market, bonds, funds... Only the official government pension doesn't. However, I would not trust this either as it is based on the so called generation contract. Germany's population is aging and declining. Just another kind of Ponzi scheme. This ones collapses when there are not enough kids - which exactly is happening the last 20 years with no change in sight. Yep, of course public money is invested in the stock market as well. Nevertheless the government must pay the adreed monthly sum for retirment. Also we have some other tools, like investing additional retirement money through banks and insurance companies into the stock market while the state adds a certain percentage every year. A monthly payment is garanteed when you retire and if the market goes well you will receive more money (so called Riester Rente for workers and Ruerup Rente for selfemployed). In regard to the future, as you said, public retirement payments will become much smaller of the years, but that's why the goverment urges to invest privately in - secure - retirement funds. Link to comment Share on other sites More sharing options...
HeartThais Posted February 10, 2009 Report Share Posted February 10, 2009 Social security isn't a ponzi scheme. It's a combination of a tax and a social welfare program. It was never meant to be treated as an investment although it LOOKS like an investment because you get these statements mailed to you. The SS statement is the worst piece of marketing ever conceived by the government for that reason. The main difference between a ponzi scheme (other than the lying aspect) is that ponzi schemes promise a return whereas SS does not. This is a huge difference. Ponzi schemes fail because an exponential number of new investors are needed to cover the compounded growth promised by the investment. At some point, a ponzi scheme must fail because there won't be enough people on the planet to sustain it. SS is a tax that is levied on working people to help older folks. We don't need an exponential number of young folks to support old folks. A tax like this is sustainable as long as there is real wage growth. If we can't make that assumption, we've got much bigger problems than SS! Now, there's no doubt there's been some fuckups in estimating how large the tax should have been. Oh well. Shit happens. It's up to us now to decide whether we want to pay up or have mom move in with us. Link to comment Share on other sites More sharing options...
Hardy641 Posted February 11, 2009 Report Share Posted February 11, 2009 You are of course right that social security isnâ??t Ponzi scheme in the classical sense. Kamui was referring to the German pension scheme which is based on the so called generation contract (â??Generationenvertragâ?Â). This particular approach has some interesting parallels to a Ponzi scheme as it relies â?? like a Ponzi scheme â?? on a steady stream of new â??joinersâ?? (in this case persons who join the workforce and support the payments of the retired generations). Looking at Germany this is more than doubtful. Germany has a declining and aging population and the steadily increasing life expectation aggravates the situation further. Today one pensioner is supported by 5 working people. Statistics - using on todayâ??s figures - hint that in 20 years 2 working people will have to support 1 pensioner. Without even considering inflation this means that in 20 years salaries must rise by 250% just to keep todayâ??s standard. To me this is extremely worrisome and one major reason I turned my back to the country 15 years ago. The government today recommends strongly looking into a private pension on top of the state pension. However, private pensions rely on more or less secure investments in the financial markets. Thus arenâ??t save eitherâ?¦. Link to comment Share on other sites More sharing options...
buffalo_bill Posted February 12, 2009 Report Share Posted February 12, 2009 So where is all the dosh piles up? Nowhere . It is wrong to think that the current crisis made any money disappear or is due to money tecnically or physically disappearing . The investment storytellers did not create cash which has now all of a sudden evaporated . The fundamental mistake in the system was that money could be borrowed too cheap and plentyful and many financial phantasies could be built on that basis . People then lost confidence in the papers and what had been bought for 1 Billion by the investment company all of a sudden had to be written off , ruined the company's balance sheet and lead into tecnical bankruptcy . Nobody has stolen their money , it is the value of the papers that shrunk . Imagination . - The money that US housebuyers cannot pay back went to the housebuilding companies , it did not disappear . The investment companies which later bought the bundled mortgages lost the value in their books and went bust because nobody buys the papers any more and consequently had to write them off in their books . - Lot of investment companies borrowed short term cash to support long term loans . This worked only as long as short term interest payable was lower than long term interest income . ( remember money was too cheap to get ) - Final implosion : All financial institutions have piles of poisoned papers , could therefore all go bust ( Lehman ) , therefore other banks loose confidence and do not give them money any more . If now the joint governments can stabilise the banking system by keeping cash floating around there is a chance that people start to think that all the structured papers might finally have value again and the dead papers would start to flourish bringing the original value back to surface in the balance sheet . The money is back Link to comment Share on other sites More sharing options...
chuckwoww Posted February 12, 2009 Report Share Posted February 12, 2009 Spot on BB. Now people don't trust the banks, banks don't trust the people and nobody trusts the government. It could take years before things get back to normal but who knows. Link to comment Share on other sites More sharing options...
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