patrick.net

cc0 says

However, Social Security doesn't promise a positive rate of return.

Absolutely false. Here is an analysis of the rate of return from Social Security. You get the best return if you are married:

http://www.angrybearblog.com/2009/03/social-security-return-on-investment.html

I suspect you aren't familiar with the input and output formulas for Social Security.

tatupu70 says

You obviously didn't understand. SS isn't designed for constantly increasing population, nor does it have to be. It is designed for a steady state of population. Unfortunately, science is allowing people to live longer which makes it tricky to balance the inflows and outflows. But it most definitely does NOT require a increasing population. That's why it is completely different than a Ponzi.

Exactly.

ArtimusMaxtor says

Netflix's problem was the people it got involved with. They put the Starz and other things on there and got their asses burnt. Not the recorded Starz but the Live Starz. They do that if you pay attention they have cable on there. They did that in the beginning of the online. Paid way to much.

I think you have this exactly wrong -- it's the opposite of this. Netflix didn't pay enough for Starz, so Starz didn't make much off the deal. However, it was a good start for Netflix's streaming business, which started collecting steam and more and more people joined because Netflix started getting more and more streaming content. Then Starz and other content producers realized they weren't making enough and raised the fees for Netflix. That's why Netflix raised the fees on users. Now, some of the content producers have either pulled their content, charged more for it, or only put limited amounts up (e.g. only library content, but not current season or last season or two).

corntrollio says

cc0 says

However, Social Security doesn't promise a positive rate of return.

Absolutely false.

Well, gee. SS was sold as a form of insurance. I did not realize that the system promised that every investor would earn more than they paid in. If that's the case, then it is more like a Ponzi Scheme than I thought.

tatupu70 says

You obviously didn't understand. SS isn't designed for constantly increasing population, nor does it have to be.

Actually, I do understand. I just got carried away at the end. The first half of my statement still applies.

tatupu70 says

What the heck are you talking about? Yes, banks offer a positive rate of return on deposits. That has nothing to do with Keynes or a Ponzi scheme.

It's really quite simple. In order for everyone to make money above their deposits, more money has to constantly flow into the system. Eventually, all the world's money is "invested" and the program can no longer maintain that promise. The only system that can pull off that feat is our banking system, but only because it gets to print its own money.

cc0 says

Actually, I do understand. I just got carried away at the end. The first half of my statement still applies.

No it doesn't.

cc0 says

It's really quite simple. In order for everyone to make money above their deposits, more money has to constantly flow into the system. Eventually, all the world's money is "invested" and the program can no longer maintain that promise. The only system that can pull off that feat is our banking system, but only because it gets to print its own money.

There are so many things wrong with that statement, I don't know where to begin.

cc0 says

Well, gee. SS was sold as a form of insurance. I did not realize that the system promised that every investor would earn more than they paid in. If that's the case, then it is more like a Ponzi Scheme than I thought.

That makes no sense. When I buy an annuity, it pays more than I paid in too. Does that mean insurance is all a Ponzi?

corntrollio says

That makes no sense. When I buy an annuity, it pays more than I paid in too. Does that mean insurance is all a Ponzi?

Maybe. It's certainly a fraud. And I've said "like Ponzi", not "is Ponzi".

My finance guy somewhat recently told me about some financial product - I think it was an annuity - with some ridiculously high guaranteed return. I forget the exact details but I asked him how such a guarantee was possible and he said he had no idea, and admitted that it sounded shady.

In the U.S. you couldn't even buy annuities before 1912 and from a brief read about them they started out as government devices, backed by the power of tax. Insurance annuities have the pricing power of the premiums, but they are nonetheless voluntary.

It also looks like if you die any survivors only get either (a) the amount invested or (b) the amount invested plus interest, depending on the annuity type. Neither is guaranteeing/promising that all participants will actuarially receive more than they paid in.

Did AIG sell annuities? What would have happened to those holders had the company been allowed to go bankrupt and receive no government bailout?

cc0 says

My finance guy somewhat recently told me about some financial product - I think it was an annuity - with some ridiculously high guaranteed return. I forget the exact details but I asked him how such a guarantee was possible and he said he had no idea, and admitted that it sounded shady.

That's because you were talking to a salesman probably. If someone can't explain what a product is to you in terms where you can understand it, you probably shouldn't be buying it. It probably also has high fees.

But if you want to find out how, say, a variable universal life policy works, I did a write-up about it: http://patrick.net/?p=816374

But that doesn't mean an annuity is a Ponzi scheme or that it's fraudulent. You either don't know what "Ponzi scheme" means, don't know what "insurance" means, or something else is awry here if you're saying that. I'm also not sure if you understand how Social Security works -- you aren't saying anything substantive that's wrong with it, but rather repeating Rick Perry's talking points.

cc0 says

n the U.S. you couldn't even buy annuities before 1912

The fact that you probably Googled "annuity" before making this post (and found a savewealth.com article) says a lot...

corntrollio says

If someone can't explain what a product is to you in terms where you can understand it, you probably shouldn't be buying it. It probably also has high fees.

I certainly didn't buy it. I didn't even ask for more details. Someone tells me I can get a guaranteed 18% YoY and I say "only in Zimbabwe".

corntrollio says

But that doesn't mean an annuity is a Ponzi scheme or that it's fraudulent.

I said that insurance was a fraud.

http://dd.pangyre.org/i/insurance.html

corntrollio says

[...] Social Security works -- you aren't saying anything substantive that's wrong with it

I've also said that Social Security isn't the problem, but Medicare is. Social Security, despite being called an insurance program or an entitlement, is just a tax. Get rid of it and replace it with welfare.

corntrollio says

Googled "annuity" before making this post (and found a savewealth.com article)

I didn't research it much, but I prefer to understand the history behind something more than its immediate market impact. That article appears to have the date wrong - 1812 is correct, if this site is to be believed:

http://www.annuity-insurers.org/Resources/History/History-of-annuities.aspx

The primary benefits I've seen of annuities are their tax savings, and yes, aside from listening to Ed Slott, I've not any experience with them.

cc0 says

Social Security, despite being called an insurance program or an entitlement, is just a tax.

It is an insurance program. It is neither structured as an entitlement nor a straight tax. There are technical definitions for each of these things.

cc0 says

I said that insurance was a fraud.

That would be a minority position not supported by the law.

cc0 says

I certainly didn't buy it. I didn't even ask for more details. Someone tells me I can get a guaranteed 18% YoY and I say "only in Zimbabwe".

If someone told you 18% (I doubt they did), you should probably report them to some authority. However, insurance plans can be structured in a variety of ways. I explained variable universal life, which at first glance can look appealing to many people, but it tends to have very high fees in most forms.

corntrollio says

If someone told you 18%, you should probably report them to some authority.

Why would I do that? Maybe the number was 16%. Maybe it was 12%.

Why would it make a difference if the guarantee was 4% or 400%?

cc0 says

Why would I do that? Maybe the number was 16%. Maybe it was 12%.

Because if they are guaranteeing you 12% YOY, they are probably a crook. It's not even close to plausible.

I was listening to the radio and I noticed someone (the Feds I think) was advertising "Having trouble making your mortgage payments? Help is available! Visit http://www.makinghomeaffordable.gov

So if you check out that link they want to keep everyone in thier home at taxpayer expense.

Who should we thank more for 'making home UNaffordable'? the D or the R?

They are even spending millions in your taxes to reach out to deadbeats to HELP THEM stay in homes they cant afford via Radio Ads.

Everyone at every level of the government/democrats are trying to re inflate house prices on taxpayer dime. IM REALLY TIRED OF THIS. We know its to bailout BANKS and they stupid loan owners are on the hook for a recourse mortgage on an underwater house if they actually Refi. Then they are screwed for sure until the BK. The banks sure do own the gov