Randoms of the day

– Unamused defines "conservative"

Yglesias thinks that normal people shouldn’t have to invest. Of course, this is true. Unfortunately, we live in a world where policies are controlled by people like Yglesias, who support inflation. Therefore, you have to invest your savings or they will slowly (or not so slowly) disappear. We are all investors now, whether we want to be or not. (Also, a balanced portfolio hasn’t been hard to achieve on the cheap for a least a decade or two now).

Simon Grey thinks the Fed is done with QEs thanks to political pressure. Unfortunately, it appears that the Fed is just responding to political pressure by changing the way it conducts bailouts. As I’ve said repeatedly, the bureaucracy is almost entirely immune to the sort of political pressure that Simon is referring to.

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5 Responses to Randoms of the day

  1. Jehu says:

    Foseti,
    It is worse than that, we’re not all investors now. We’re all effectively speculators. Regime uncertainty leads to the conclusion than none of us can predict with any certainty what the playing field is going to look like N quarters forward, and N is a small number. This is a big part of why Representatives and especially Senators get outsized returns on their investments. They’re the only ones who are allowed to do something worse than insider trading.

  2. Gilbert pinfold says:

    ” (Also, a balanced portfolio hasn’t been hard to achieve on the cheap for a least a decade or two now).”
    Yes, but lately ‘balanced’ has meant getting evenly boned in almost every asset class.

  3. Simon Grey says:

    I should clarify that my prediction is only concerned with official since that is provable. Saying that The Fed will switch to secret bailouts, though in effect the same thing, is by definition impossible to prove. Basically, I think The Fed will become considerably more discreet about the way it conducts business, and I just needed a provable metric.

  4. Anonymous says:

    Check this:

    Egyptian security forces on Thursday raided the offices of 17 nongovernmental organizations, including three U.S.-based agencies, as part of a crackdown on foreign assistance that has drawn criticism from the West and threatened human rights groups and pro-democracy movements.

    http://www.latimes.com/news/nationworld/world/la-fg-egypt-ngo-raids-20111230,0,420905.story

    Think they’re reading moldbug?

  5. Handle says:

    Insofar as “guaranteed real return investments” are concerned, here’s a private-accounts military program – in which I’ve participated – which was created precisely to encourage savings by removing all risk burden from deployed participants.

    It’s basically a limited-time-and-purpose CD. You put in your money and you get 10% interest for as long as you’re deployed. It’s only up to $10K per person, and few people really can or do take full advantage of it, so the total cost to the government over the last decade has been quite small – literally a rounding error in a day’s war spending. My judgment is that the program has successfully encouraged a lot of private saving that would otherwise have been merely frittered away.

    The rationale is twofold. First: Deployed Servicemen simply don’t have the ability to closely watch their investments and you neither want them to be distracted by worry while they’re downrange. And second: because single Soldiers don’t really have any expenses at all when overseas, a lot of junior enlisted will be accumulating large amounts of extra cash for the first time in their lives (and they don’t have the advantage of coming from families where they even would have witnessed and acquired habits of thrift with surplus).

    If you don’t give them some investment vehicle that is both safe, worthwhile, and locks them into at least a little deferred gratification – they will predictably blow it immediately on junk – mostly things they falsely believe will help get them laid. Just like most things in the military, it’s “Libertarian Paternalism” avant la lettre.

    Actually – and as an aside – the irony is that the US military, being by its very nature a Socialist Nationalist organization (albeit one where influential elites come from the internal Hierarchy and not the Cathedral), has often enacted some form of every Progressive project years before the Progressives ever began to think about it. In Miranda, the Court actually mentioned the fact that the Military had already extended similar rights to the accused without much apparent detriment to the government’s ability to prosecute crimes. General ignorance of and bigotry against the separate world of the American military prevents today’s post-New-Left American Progressives from similarly using the best real-world examples to make their arguments. Maybe that’s for the best.

    Depending who you walk to, the “third rationale” is that your average junior enlistedman, whether deployed or not, simply isn’t capable, either by lack of education, maturity, savvy, or raw cognitive capacity, to navigate the stormy seas of modern financial markets (one wonders what fraction of the population is so qualified).

    You can model the problem – you’ve taken Econ, so you know about the Capital Assets Pricing Model and Markowitz’s Efficient Frontier. If you’ve got “good as possible” information and calculating ability, you can find some asset along your optimal Capital Allocation Line. But if you don’t have those things (which most normal people certainly do not), and you’re honest about your own limitations (which most people aren’t) you have to add an uncertainty-premium on every asset and you end up stuck in “spend-me-now!” cash (since extremely-low-yield bonds aren’t even worth the “transaction costs” for most folks). For people in this situation, a small subsidy to provide an avenue of safe good-yielding savings is just enough incentive to push people over the hump and accomplishes a surprising amount of additional thrift. Surprisingly, but somewhat less successfully, it also helps establish long-term habits of thrifty behavior.

    In addition to the SDP, there’s the non-deployment TSP “Thrift Savings Program”, as well as the pension, disability, and health-care systems. These programs accomplish for Servicemen (in exchange for that service, and a lot of risk, sacrifice, and lack of personal freedom) the same things the Progressives want the welfare-state to give to everyone – especially the members of their vote-bank coalition – with no strings attached.

    Of course, the big difference between the SDP and Social Security is that it is voluntary and private as opposed to coercive and collective. The military (in that Old-Left / “fascist” tendency it has) augments mere Socialism with the cultural pieces that Progressivism lacks: An realistically “judgmental” focus on improving and guiding individual behavior through significant carrots and sticks, a need to insist on actual performance and personal responsibility, and a more properly callous “tough shit” attitude towards those that have gotten themselves into trouble or failed to take advantage of benefits when made available.

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