Re: how to compare living standards


"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
news:pcnu025it5qu0fq51rsdt6s0g11liblns4@xxxxxxxxxx
On Wed, 8 Mar 2006 14:46:37 -0600, "Jim Blair" <jeb@xxxxxxxx> wrote:

"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message

Jim, you are conflating financial savings and real savings.

Hi,

Aren't stocks and bonds "real"? Or are they just "financial"?

Bonds are simply claims on the future delivery of money.

Hi,

Like US treasury bonds? Or like my Social Security account?

.....Stock
certificates are a claims on real property, ....

Doesn't that make them "real"?

....but the monetary value
varies unpredictably. Unless you exchange the certificate for the
real property itself, you are dealing in a financial asset.

What about the dividends they pay? Isn't that real money?


If the X corporation is "real", why would its stock not be?

As above.

....It is
easy to devise a system of retirement savings in terms of financial
wealth for everyone. But individuals need to save for retirement in
the equivalent of real wealth.

Is money saved/invested in an IRA "equivalent to real wealth"?

Generally no. A trust deed or a certificate of ownership such as a
car pink slip would be "equivalent to real wealth."

But I thought a stock IS a "certificate of ownership". And an IRA typically
consists of stocks, usually in mutual funds.
And the mutual fund is a collection of corporate stocks and bonds and bank
CD's and US treasury bills.


....Saving dollars or other purely
financial assets doesn't help for retirement if real economic growth
is not commensurate with the growth of the retired population.

jeb:

I agree that an IRA will not be much good as a source of retirement
income
if the companies in the mutual fund don't pay dividends and don't have
their
stock prices appreciate.
(and I add: and if the corporations and governments default on their bonds)

But this is not a question of "how certain is the future of the Global
economy?". It is a matter of comparison. Which has the better prospects
for the future: A or B?
And I say the global economy is a better base for retirement income than
the
wage base of American workers. That given the demographics of the US and
the world populations.

WFH:

Yes, if "global economy" refers to capital goods, consumer goods, and
services.

I think the term includes all of those, plus whatever else is included in
the word "economy". Even the raw materials and "human capital" of skills
and training that contribute to the output of "the economy".


And all of this is not the *real* question anyway, since Americans are
now,
and will continue to, use income from both A and B for their retirement.
But now those who pay income taxes can (and do) deduct retirement money
from
their IRS taxes. So why not let them also deduct money saved for
retirement
from that OTHER income tax that applies to wages only, and which collects
relatively more from the lower incomes?

The important point is that saving dollars or other forms of financial
wealth does not provide for the future. Only real savings can do
that.

I say give low income workers the same tax break that the higher income
people now have.

Specifically what are you proposing?

What Bush (rather his committee) proposed: let people divert a portion of
their FICA tax into their IRA in the same way that people can divert (i.e.
deduct) a portion of their income tax into an IRA. I think the proposal was
to limit the FICA deduction to 4% of their Social Security income capped at
$1000 a year. In the same way that the IRA deduction is capped. (It used to
be $3500 a year as I recall).

How would the FICA's "lost money" be made up? The same way the money "lost"
to the treasury because of the IRS IRA deduction is "made up".
Namely: unspecified ;-)



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jim blair (jeblair@xxxxxxxx) Madison Wisconsin USA.
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