If skilled fund managers with strong emphasis on "skilled", oversee the investments, the fund could outperform the traditional SS system, which mainly invests in U.S. Treasury bonds with lower returns. The problem now is SS is invested 100 percent in government bonds, meaning it does not earn a fair interest rate. As pointed out the Democrats will never allow SS to be converted to private hands.
The current Social Security system faces long-term funding challenges due to an aging population and a shrinking workforce. A wealth fund, managed by capable professionals, might generate returns that outpace demographic pressures and inflation, thus providing more stability for future generations of Americans. A wealth fund would cause a decoupling from government debt and who in their right mind wouldn't want that? If Social Security funds are invested in a diversified wealth fund, the system could become less dependent on government borrowing and budget decisions, potentially reducing the risk of insolvency or needing to raise taxes in the future.
The introduction of capable managers (whether private investment firms or public sector entities) could inject fresh ideas and strategies into how the fund is managed, fostering economic growth and innovation. A really big advantage that should be considered is that a wealth fund that invests in private sector projects or startups could help drive innovation and create new industries or employment opportunities, benefiting the broader economy.
With rigorous and regular reporting and oversight wealth funds often operate under more transparency than traditional government programs. With independent auditors and performance reports, fund members can track how their money is being managed, which could lead to improved governance and more effective and wise use of funds.
With skilled wealth fund managers they would be able to ensure the fund is efficiently allocated and invested based on rigorous analyses, improving overall returns and reducing wasteful spending. The Social Security Administration (SSA) reported $88.05 million in confirmed financial fraud for FY 2023, which specifically refers to cases confirmed by court cases. In FY 2024, there were 332,927 reported allegations of fraud, with a significant portion related to false personation (26.7 percent of the cases reported) and Social Security Number misuse. Who do you trust? In FY 2024, 16 federal agencies collectively reported an estimated total of about $162 billion in improper payments across 68 programs. Cumulatively, federal improper payments since FY 2003 are estimated at approximately $2.8 trillion (see this week in waste).
A wealth fund would likely have global exposure giving it more flexibility meaning it could invest in international markets, exposing participants to growth in emerging economies and reducing the risk of relying solely on US economic conditions. Imagine for a moment a US wealth fund investing in Saudi Arabia's Aramco or in Russia's resource sector like gas and oil instead of destructive economic sanctions that have proven to be hurting America? Maybe this is one reason why the Democrats oppose a wealth fund? Funds from places like Singapore (Temasek and GIC) and the Middle East (Public Investment Fund of Saudi Arabia, or PIF, and Abu Dhabi Investment Authority (ADIA was established in 1976), are known for their more active and strategic investments in specific companies and industries around the world.
Adaptability to market conditions by wealth fund experienced professionals could quickly adjust to market changes, enabling them to take advantage of short-term opportunities or hedge against economic downturns. A wealth fund creation for future generations if managed wisely, could grow substantially over the long term, providing a robust safety net for future retirees. This may allow for more generous benefits over time, or a reduction in the overall tax burden needed to sustain the current failing Social Security system.
There would be less vulnerability to political pressure given the Democrats opposition to the creation of a wealth fund. The Social Security system, being heavily reliant on government decision-making, can be subject to political whims and populist policies. A wealth fund, managed by professionals, might be more insulated from these shifts and be focused more on long-term sustainability. The democrats would likely resent less reliance on them for their political decisions they make from their power base. A wealth fund would likely result in less political power for the Democrats.
Wealth funds could be more agile, adjusting their strategies based on macroeconomic and geopolitical factors, thus improving the fund's resilience to political changes. There would be significant challenges though including one of the biggest concerns being management costs. Professional fund management comes with costs, huge costs, and it may be difficult to ensure managers consistently outperform low-risk, low-cost government bond investments.
Market volatility would likely cause uncertainty and fear. The risk of short-term market fluctuations and economic downturns could put participants' retirement funds at risk, unlike the current system, which is more stable but lower yielding. That lower yielding will become even lower as bond yields are not returning a fair interest rate.
There would also have to be taken into consideration the moral hazard in establishing a wealth fund for all Americans. There would be the possibility that fund managers may take excessive risks, aiming for higher returns but endangering the stability of the fund in the long run. The downside would be the inequality in fund distribution. If not structured carefully, the fund could disproportionately benefit wealthier individuals who would take advantage of riskier, higher-return investments.
Converting Social Security into a wealth fund managed by capable professionals could bring increased returns, improved sustainability, and greater individual control, while potentially reducing government dependency and addressing long-term solvency concerns. However, there would need to be strong safeguards to manage risks, ensure transparency, and maintain the fund's purpose of providing retirement security for all Americans. Balancing the need for professional management with public accountability would be key to its long term success. These advantages are highly debated and there are significant counterarguments and risks associated with this type of reform, including the potential for market volatility, high transition costs, and the loss of a guaranteed benefit. Public opinion on the issue is often divided, with many people expressing a preference for the security of the current system.
________
On a related note concerning money flows understand that consumerism is a perfect form of slavery. How many people do you know who have disciplined themselves to produce more than they consume? In other words, with a wealth fund would Americans learn to control their consumer spending and redirect that savings into a wealth fund they would have better control over and more of an incentive to save?
Consumer Sentiment Not Indicative of Consumer Spending
When it comes to the critical aspect of the ownership of wealth with a wealth fund model, individuals might have more personal ownership of their retirement savings. They could potentially track their funds' performance, and in some systems, even have the option to select investment strategies based on their risk tolerance. If structured well, individuals could carry their share of the wealth fund with them if they change jobs or move to another country, as opposed to the current system where benefits are tied to specific employers and employment history.
The introduction of capable managers (whether private investment firms or public sector entities) could inject fresh ideas and strategies into how the fund is managed, fostering economic growth and innovation. A really big advantage that should be considered is that a wealth fund that invests in private sector projects or startups could help drive innovation and create new industries or employment opportunities, benefiting the broader economy.
With rigorous and regular reporting and oversight wealth funds often operate under more transparency than traditional government programs. With independent auditors and performance reports, fund members can track how their money is being managed, which could lead to improved governance and more effective and wise use of funds.
With skilled wealth fund managers they would be able to ensure the fund is efficiently allocated and invested based on rigorous analyses, improving overall returns and reducing wasteful spending. The Social Security Administration (SSA) reported $88.05 million in confirmed financial fraud for FY 2023, which specifically refers to cases confirmed by court cases. In FY 2024, there were 332,927 reported allegations of fraud, with a significant portion related to false personation (26.7 percent of the cases reported) and Social Security Number misuse. Who do you trust? In FY 2024, 16 federal agencies collectively reported an estimated total of about $162 billion in improper payments across 68 programs. Cumulatively, federal improper payments since FY 2003 are estimated at approximately $2.8 trillion (see this week in waste).
A wealth fund would likely have global exposure giving it more flexibility meaning it could invest in international markets, exposing participants to growth in emerging economies and reducing the risk of relying solely on US economic conditions. Imagine for a moment a US wealth fund investing in Saudi Arabia's Aramco or in Russia's resource sector like gas and oil instead of destructive economic sanctions that have proven to be hurting America? Maybe this is one reason why the Democrats oppose a wealth fund? Funds from places like Singapore (Temasek and GIC) and the Middle East (Public Investment Fund of Saudi Arabia, or PIF, and Abu Dhabi Investment Authority (ADIA was established in 1976), are known for their more active and strategic investments in specific companies and industries around the world.
Norway's Government Pension Fund Global (GPFG), often called the "Oil Fund," is widely considered the largest sovereign wealth fund in the world. As of recent data, its assets under management are well over a trillion dollars, making it a major player in global markets. Norway's GPFG's success is generally measured by its enormous size and long-term, responsible management, which has been key to its growth.
Adaptability to market conditions by wealth fund experienced professionals could quickly adjust to market changes, enabling them to take advantage of short-term opportunities or hedge against economic downturns. A wealth fund creation for future generations if managed wisely, could grow substantially over the long term, providing a robust safety net for future retirees. This may allow for more generous benefits over time, or a reduction in the overall tax burden needed to sustain the current failing Social Security system.
There would be less vulnerability to political pressure given the Democrats opposition to the creation of a wealth fund. The Social Security system, being heavily reliant on government decision-making, can be subject to political whims and populist policies. A wealth fund, managed by professionals, might be more insulated from these shifts and be focused more on long-term sustainability. The democrats would likely resent less reliance on them for their political decisions they make from their power base. A wealth fund would likely result in less political power for the Democrats.
Wealth funds could be more agile, adjusting their strategies based on macroeconomic and geopolitical factors, thus improving the fund's resilience to political changes. There would be significant challenges though including one of the biggest concerns being management costs. Professional fund management comes with costs, huge costs, and it may be difficult to ensure managers consistently outperform low-risk, low-cost government bond investments.
Market volatility would likely cause uncertainty and fear. The risk of short-term market fluctuations and economic downturns could put participants' retirement funds at risk, unlike the current system, which is more stable but lower yielding. That lower yielding will become even lower as bond yields are not returning a fair interest rate.
There would also have to be taken into consideration the moral hazard in establishing a wealth fund for all Americans. There would be the possibility that fund managers may take excessive risks, aiming for higher returns but endangering the stability of the fund in the long run. The downside would be the inequality in fund distribution. If not structured carefully, the fund could disproportionately benefit wealthier individuals who would take advantage of riskier, higher-return investments.
Converting Social Security into a wealth fund managed by capable professionals could bring increased returns, improved sustainability, and greater individual control, while potentially reducing government dependency and addressing long-term solvency concerns. However, there would need to be strong safeguards to manage risks, ensure transparency, and maintain the fund's purpose of providing retirement security for all Americans. Balancing the need for professional management with public accountability would be key to its long term success. These advantages are highly debated and there are significant counterarguments and risks associated with this type of reform, including the potential for market volatility, high transition costs, and the loss of a guaranteed benefit. Public opinion on the issue is often divided, with many people expressing a preference for the security of the current system.
________
On a related note concerning money flows understand that consumerism is a perfect form of slavery. How many people do you know who have disciplined themselves to produce more than they consume? In other words, with a wealth fund would Americans learn to control their consumer spending and redirect that savings into a wealth fund they would have better control over and more of an incentive to save?
Consumer Sentiment Not Indicative of Consumer Spending
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