[OT]America. The land of the not-so-free (economy)

Greg Rundlett greg at freephile.com
Sat Jan 8 11:14:01 EST 2005


Derek Martin wrote:

>On Fri, Jan 07, 2005 at 07:59:28AM -0500, Will Johnson wrote:
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[snip]

>>> <>
>>> (Why am I getting dragged into this? Why?)
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I'm getting dragged back into it because I started the whole OT thread 
;-)  Nice to see a lively discussion.

>>1. The Social Security system is insurance, not a savings account.  It 
>>spreads the risk of uncertain health and longevity over the population.
>>    
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>
>Exactly.  Only the insurance companies actuaries do a much better job
>of managing the risks (money outflow) against the premiums (money
>in-flow).  
>
A national 'insurance' or 'pension' plan will always outperform the 
*average* individual (privatized) account.  The average person is in no 
position to manage investments[period].  Fiduciary responsibility (and 
the laws that define it) dictate that money is invested wisely on behalf 
of investors when money is managed (by say a pension fund 
administrator).  The proponents of privatization in the past have mocked 
the investment returns of the SS fund at a time when the stock market 
was on fire, and everyone thought that they too could be a millionaire.  
Those criticisms have died down now that the average person has lost 
their shirt in the stock market since 2001.  I'm not giving you a 
political opinion, but rather my opinion based on years of experience in 
the financial markets that individually managed investment accounts are 
a bad idea.  Generally, the more you can pool investment resources, and 
place the management of those resources in the hands of a dedicated 
professional, the better off everyone is.

Actually, I believe computers are akin to money in this way.  We all 
have to use money/computers, and we all should have a solid base of 
competence in handling money/computers, but by no means should everyone 
have to be expert in money/computers.

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>>3. Capitalism depends on growing markets or increased consumption to 
>>give an investor dividend.  What happens when the population saturates 
>>and the natural resources wane?  Might that not happen in your time?  
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There are huge challenges ahead due to global population growth and 
demand for finite natural resources (like solving where to put all the 
trash... no doubt we *will* be sending trash into space soon).

However, Fred's 'zero-sum gain' argument about the stock market is quite 
misleading.  Like plants convert the sun's energy into physical 
material, companies convert work energy into physical assets and 
'equity'.  As long as people show up to work, there will be companies 
which are growing.  Some fail, some decrease in value because the cost 
of the work exceeds the value of the output (and some plants in the 
garden wither and die), but I think this is a clearer picture of how 
stock 'tokens' can increase in value without being confined to some 
maxim that says somebody somewhere else had to lose.  Which token to 
buy, at what price etc. are nearly impossilbe short-term decisions, 
which is why long-term diversified invesments are the best way to 
achieve the best risk-adjusted returns.

I could easily bore everyone (if I haven't already) with more of my 
experiences and opinions regarding the stock market, but instead, I'll 
throw in a curveball that brings my post on-topic:  Isn't it ironic that 
Wall Street was among the earliest and widest adopters of Free 
Software?  All the major brokerages and financial institutions are using 
Linux.  You just can't ignore the value equation of free labor (like 
sunshine) producing tangible value when that tangible value (Linux) 
outperforms other available options at any price.

Well, in case I've managed to bring this post back on topic, feel free 
to change the subject line.

-Greg






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