Asymmetrical Information

All the evidence so far suggests that President Bush plans to finance private accounts by running a bigger current deficit. Is it your claim that this will result in a net increase in national savings?

When we divert the FICA money into private accounts, we take money that is currently masking a huge unfunded liability, enabling the government to spend money on unproductive programmes like farm subsidies, and divert it into productive investments.... It forces the government to make hard choices about unnecessary spending.

The federal government has shown that it is willing to borrow whatever money is needed to spend on whatever is needed to favor reelection. Isn't it a little naive to bring out the "starve the beast rationale" when we have $400 billion deficits already?

You've said repeatedly on this blog that the link between budget deficits and real interest rates is tenuous at best--that was when Democrats were arguing that federal borrow-and-spend policies could hurt the economy. If the bond market isn't a factor, what exactly in the privatization program is going to force the government to make these hard choices when it hasn't done so already? Who is waiting in the wings to audit the Republicans' budget?

When we divert the FICA money into private accounts, we take money that is currently masking a huge unfunded liability, enabling the government to spend money on unproductive programmes like farm subsidies, and divert it into productive investments. (Even if you are in favour of much of what the government spends money on -- whether it be defense or welfare -- it takes a pretty ideological character to argue that this spending is increasing the growth rate). It forces the government to make hard choices about unnecessary spending, which I think is a good thing, but more importantly, increases the stock of private capital over the long term. (Not of course, over the short term, because the government will be borrowing to fund the gap).

The problem with this line of thinking is that the SSI fund is effectively an accounting device the facilitates saving by the gov't. How does it do this? By bringing in more funds than it pays out the surplus indirectly reduces gov't debt held by the public. Before everyone goes ballistic, let's assume fo rthe sake of the argument that the SSI surplus has no effect on gov't spending. Will the surplus decrease the 'stock of private capital' that Jane is gushing over? No, in fact it will increase it. Why? Because when the gov't reduces debt held by the public, that money is free to purchase 'private capital'...in other words things like corporate stocks, bonds, and other instruments that hopefully will find their way into productive private investment. If a surplus increases private capital then what must abolishing a surplus do? Decrease private capital is the answer.

The 'increase' in private capital Jane imagines will be wiped out by the decrease in private capital when the gov't starts massive borrowing from the public to finance the transition. This leaves only one avenue for Jane to be right, the 'ATM theory of gov't spending'.

What is the 'ATM Theory of Spending'? Say you go to the ATM to take out $20 for dinner. You think you have a balance of $1000 but you see the receipt says $1900. You, forgetting that you wrote a $900 check that didn't clear, think you are richer and take out another $50 to blow on silliness.

This theory would predict that Congressmen notice a surplus (or smaller deficit) and say woopie, let's do another farm subsidy this year. In reality, there's good reasons to doubt this. I'll list some of them:

1. Emprical evidence - Over on Arnold Kling's site I (several times) ran numberous regressions looking for a relationship between spending as a % of GDP to tax revenue and found either a negative relationship (more tax revenue results in less spending) or no significant relationship.

2. Our knowledge of how the Federal Budget works. Most of the arguments around the Federal Budget involve a small slice called 'discretionary spending'. In the real economy, though, a check from the US Treasury for $100 is worth exactly $100 whether the accounting bucket it was issued from says 'mandatory spending', 'entitlement spending' or 'discretionary spending'. In year to year operations, most spending is on auto-pilot. In theory Congress could decide to abolish SSI benefits or not pay interest on the National Debt...in reality doing so would be like assuming a nuclear war or takeover from space aliens in our economic models.

3. Implications of auto-pilot spending: Those of you who took Macro-Economics I should know this from the term 'automatic stablizers'. Spending and taxing are linked to the economy. When the economy improves taxes go up because more economic activity leaves percentages in the taxman's bucket. Spending, though, goes down. Why? Because in a booming economy people do things like take jobs instead of an unemployment check, delay retiring, have employer health benefits rather than Medicaid and so on. In a somewhat circular relationship, increased tax revenue reduces borrowing which thereby reduces spending on interest as well.

If gov't spending is not cut by SSI privitization, there is no reason to make the assumptions that Jane does. SSI privitization will most likely cut rather than increase the 'private stock of capital' in the economy. I strongly suggest we resist the temptation to 'dynamically score' SSI privitization models....

If the administration is currently ignoring the non-masked portion of that general account liability, what is it about diverting funds to private accounts that will lead to a balanced budget?

And if this is the goal, why not address it directly with the general funds liabilities rather than through a complex reform targeted to intra-government debts that begin to come due 15 years from now?

If large amounts of additional capital are invested in the stock & bond markets, the law of diminishing returns suggests that returns will fall. It's not obvious how much, but two factors will operate:

1)Since corporations try to prioritize capital projects by ROI, the first billion will generate higher returns than the second billion.

2)To some degree, additional money in the markets will serve to inflate prices for existing securities without totally flowing through to new corporate investment (since IPOs and secondaries represent a fairly small part of the overall market.)

These aren't an argument against privatization, but are certainly things that ought to be thought about before reaching any conclusions.

"In other words, if GDP growth averages, say, 2.2% over the next 75 years, Social Security is in fine shape and we don't have to do anything. "

Not true. Three reasons for private accounts even in that scenario -- the third one BRAND NEW, from a new study you may soon be hearing more about!

1) Liquidating the SS trust fund to pay boomer benefits is going to cost $5 trillion cash in new taxes and new debt -- and this is *not* counted in SS's $10 trillion unfunded liability because the trust fund is considered "funded" (ah, the joys of government accounting!)

That $5 trillion cash bill is going to come due just as even more trillions come due to pay Medicare, Medicaid, etc. There's no way around this. (In fact, demand for medical care seems to rise with income but *faster* than it, so higher income may make the Medicare bear worse.)

GAO says deficits are heading to 20% of GDP(!) by 2040 or so on current rules, in no small part due to that SS $5 trillion of funding need.

Thus, any $1 borrowed today that merely saves the need to borrow-or-tax only $1 about 30 years from now is a big help. (Finance when conditions are easy, not brutal!) Every dollar borrowed today that saves the need to borrow or tax *more* than $1 about 30 years from now is a *bigger* help.

I've put a chart and links making all this easier to see at
http://www.scrivener.net/2004/12/social-security-reform-simple-reason.html

2) Every annual cohort retiring after 2000 will receive *negative returns* from SS, with the young as things stand to get as little as only 35%(!) of their contributions back. (50% under current law which is 30% underfunded -- so any paygo fix of benefit-cuts/tax-increases reduces them by 30%.) Even a "painless miracle cure" leaves those at 50%.

Face it, SS has been hugely popular with the middle class because it *gave them money*, and a lot of it too. But how popular is SS going to be when it is making *everyone poorer* ... with losses up to 50% to 65%?

The only way to get SS back to positive returns is with a least some private investment in it that pays positive returns to offset the paygo formula's negative ones.

Now, a lot of status-quoers these days are hand-waving away the idea of positive returns as mattering, starting now going forward, even though they have been the political backbone of SS all through its history. They practice this denial at their peril.

3) NEW: You've all heard the argument about the SS Trust Fund and whether it is real savings or has all been spent. Much heat, but little light on that until now.

But now there is some! And it will ruin Krugman's day.

Kent Smetters of NBER & Wharton has analyzed the historical effect of the Trust Fund's "savings" on the budget and national savings, and has concluded that the value of the trust fund is not even zero but *negative*, maybe by a cool trillion dollars or so. Letting him speak for himself:

~~ quote ~~

We find that there is no empirical evidence supporting the claim that trust fund assets have reduced the level of debt held by the public. In fact, the evidence suggests just the opposite: trust fund assets have probably increased the level of debt held by the public....

... each dollar of Social Security surplus appears to have actually increased the debt held by the public in the past by $1.76.

At first glance, this dramatic overspending of Social Security surpluses seems entirely implausible. However, the next section presents a simple game theory model that is consistent with this result...

[The political game is nifty, but you have to read the paper to get it]

... going forward, the results herein suggest that a newer mechanism might be needed in order to prevent Social Security surpluses from being spent elsewhere...

Creating a more safe storage technology, therefore, might require the adoption of personal accounts that augment the current Social Security system...

~ end quote ~

The Trust Fund is scheduled to take in another $3.5 trillion.

Stop the politicians from spending $6 trillion of it! Put it in private accounts!

More explanation at:
http://www.scrivener.net/2004/12/is-social-security-trust-fund-worth.html

The study itself is at:
http://irm.wharton.upenn.edu/WP-security-Smetters.pdf

Thus, any $1 borrowed today that merely saves the need to borrow-or-tax only $1 about 30 years from now is a big help. (Finance when conditions are easy, not brutal!) Every dollar borrowed today that saves the need to borrow or tax *more* than $1 about 30 years from now is a *bigger* help.

So if you're facing a $10,000 bill ten years from now the logical thing to do is to run up a $10,000 tab on your credit cards today? As opposed to, say, paying off some of your credit cards today to prepare for when the $10K bill is due?

The only way to get SS back to positive returns is with a least some private investment in it that pays positive returns to offset the paygo formula's negative ones.

I'll say it again, all returns are limited by the economy's overall growth rate. No private investment can earn a return above the overall growth rate unless there are other investments (private or not) earning less than the growth rate.

Kent Smetters of NBER & Wharton has analyzed the historical effect of the Trust Fund's "savings" on the budget and national savings, and has concluded that the value of the trust fund is not even zero but *negative*, maybe by a cool trillion dollars or so. Letting him speak for himself:

Of course I'll want to read more when it is available but the $1.76 figure you provide leads me to believe his measurements were done in either nominal or inflation adjusted dollars. My analysis was done using % of GDP and it showed the opposite.

Boonton, it depends on the interest rate on the debt. It doesn't make sense to borrow 10K on your credit card, because at 18% interest, you're just digging the hole deeper. If your interest rate is in normal ranges, however, then paying off the debt now is essentially a revenue-neutral transaction, especially for the government, which does its business in a debt market, rather than in a bank which takes a hefty cut. And if your interest rate is extremely low, as the United States government's currently is, then paying off low-interest debt now, in order to borrow at higher interest rates later (as the government would presumably have to in order to fund the shortfalls) is a negative-value transaction.

Kevin, if the government is in fact going to pay the benefits, then the borrowing will, over the short term, be neutral to US savings (although not to cash flow). Over the long term I assume it will result in a net increase in national savings for several reasons:

1) There is a political (and thus a policy) difference between implicit and explicit spending; that's why tax subsidies are easier to pass than cash handouts even though they're the same thing to the recipient, and tax subsidies have all sorts of nasty economic side effects. Similarly, I expect making the accruing liability explicit, rather than implicit, will cause the government to cut back spending, thus increasing national savings.

2) I assume that the property ownership of the pension will cause more people to participate in the system (rather than working off the books, or taking vacation to paint their house instead of paying someone else to do it).

Any way you cut it, privatisation cannot decrease national savings unless you believe that the government will, at some point, default on its implied liability. If you believe that hte government will default on this liability -- which is the only way that one can argue that privatisation somehow increases national debt -- then you are correct in arguing that the plan will decrease national savings. But I'd say it's pretty goddamn immoral to consciously argue for swindling gullible young voters out of their tax money by making them involuntary victims of a Ponzi scheme.

I surprised that Cobra isn't all over this one.

The best rational for changes to the Social Security system is that it is inherently unfair to the individual. Isn't Liberatarianism all about the individual?

Black males get the worst out of the the current SS structure. White females get the most return.
If SS is reformed those assets can be passed to the families to ensure that the coming generations can benefit from the greater opportunites that an increase in wealth, even if meager, provides.

Boonton, it depends on the interest rate on the debt. It doesn't make sense to borrow 10K on your credit card, because at 18% interest, you're just digging the hole deeper. If your interest rate is in normal ranges, however, then paying off the debt now is essentially a revenue-neutral transaction, especially for the government, which does its business in a debt market, rather than in a bank which takes a hefty cut.

Unless you were experiencing negative interest rates, it is always more sensible to reduce debt today if you know you will be facing a large bill tomorrow. The reduction of debt today, in national terms, would be the increase in private capital that you wanted since every bond not sold to the public (or brought back from) today represents so many dollars that can be used for private investment today.

I'm skeptical of your second point. Basically what you're saying is that the underground economy will be motivated to 'come in from the cold' and hence make itself available to the tax base. In essence, 'off the books' wages will come on the books where mandatory 'savings' will purchase some of those bonds the gov't will be selling for those of us on the books.

1. The US has a relatively light 'off the books' ratio of illigitimate income to legitimate income. This is especially true if you factor out income earned from criminal activities which will be as illegal in a privatized SSI world as it is in ours.

2. Many 'off the books' non-criminal earners are low income and have a low propensity to save. Hence the motivation to 'come in from the cold' and loose access to a portion of their disposable income is low.

3. Quickie 'cash' jobs (I'll give you $500 to paint my house, $50 to watch my kids for the weekend) are not going to come on the books even with an 'ownership feature' built into them. The reason these jobs are off the books are because no one wants to fill out the paperwork to do them properly. Are you seriously going to demand to write your babysitter a check for $40 and issue a different check for $10 to her '401K'?

Flaw in Jim's study

Following the study that Jim cited, I noticed that they used real dollars but they divided figures by the years 'potential GDP'. What's intersting about this is that it factors out the business cycle. Unfortunately it's quite foolish to do this if you're trying to understand why the gov't's debt changes.

The crux of the disagreement, I believe, is over whether an SSI surplus causes the government's other spending to increase by an equal or greater amount. If it doesn't then the trust fund acts as a savings mechanism. As a savings mechanism it doesn't fund SSI as a traditional pension fund would but the gov't...tied to the whole economy...cannot be a traditional pension fund. It does prepare for the future by the following:

1. If debt is cut $1 today then $1 can be borrowed tomorrow. Even if your interest rates are 1% it is silly to borrow a dollar today if you are not going to need it for 20 years.

2. Unlike an individual or company, the gov't is directly tied to the economy. If I gave Bill Gates a $100 Christmas gift back in 1970 and he used that to get Microsoft off the ground, it means nothing to my financial situtation. However, if the gov't gave Gates that $100 it matters because Microsoft has added so much wealth to the economy that the gov't can take back $100 in taxes a thousand times over. By using a surplus to reduce debt the gov't is doing the best thing possible with it. It is literally putting it back in the economy. There, if you trust the private sector, it will grow the economy.

3. At the same time gov't benefits from the reduced interest cost between the point it lowered its debt and where it had to borrow again.

I'll ask Jim and others if they have any problem with 1-3 IF they accept, for the sake of argument, that the SSI surplus had no effect on gov't spending elsewhere.

Social Security is only "fine", if one ignores the political implications of using general revenues to pay the trust fund obligations, and (unwisely) assumes that the same political dynamic which obtains today will obtain in the future. Jim Glass is correct that SS has been wildly popular because it has been such a fabulous deal, particularly for those who retired in the 1970s. As SS becomes a bad deal, the sheep are not going to go meekly to slaughter. If nothing is changed, there will be a default on the trust fund bonds, for the same reason that any bond obligation is defaulted on; those responsible for paying the obligation will conclude that the consequences of a default are less painful than the consequences of meeting the obligation.

The stresses that SSI face is that benefits are growing faster than the economy. Simply grow the benefits as fast or a bit slower than the economy and the problem is solved. This can be done through a combination of means testing and age indexing benefits.

But from a policy perspective, the effect on economic growth is the only rational reason to privatise (other than the moral imperative of not misleading gullible Americans into believing that their payroll taxes are somehow earning them a pension to which they will be entitled when they retire).

There's a third one as well. Social Security has an actuarial deficit because on the aggregate it promises the individual more in benefits than it collects from him or her in revenue. Each new person added to the system will be paying into it, but s/he will also be promised more in benefits than s/he will be paying in contributions. Hence it actually makes the problem worse. Letting people out by investing a portion of their FICA in exchange for lower benefits (rather than forcing them to remain in the system and have to be obligated to pay them more in benefits than they pay in contributions) is simply the logical response to what one does when one finds oneself in a hole. Stop digging.

"Jim Glass is correct..."

Whooo Hooo!

"...that SS has been wildly popular because it has been such a fabulous deal, particularly for those who retired in the 1970s.

"As SS becomes a bad deal, the sheep are not going to go meekly to slaughter"

Yes indeed -- and this is so obvious that it frankly befuddles me about all those who claim to be defenders of SS "as we know it" who are opposed to private accounts.

They should be the *first* persons to want private investments in SS to get those positive returns back and preserve SS as much as possible "as we know it" -- because SS *as we know it* has always been built on them politically.

But instead their answer is "things aren't so bad, just cut benefits and/or raise taxes some to make returns even more negative".

What has *absolutely driven* the politics of SS starting with the 1939 re-write of it has been *high returns on contributions* -- $11 trillion dollars worth to pre-2000 retirees. And they didn't go to the poor -- the great bulk went to the (voting) non-poor middle class.

It's *easy* for a program to be hugely popular when it is a great money-providing deal for everyone. But it's not going to be so easy to keep it popular when it is making all post-2000 retirees poorer by $11 trillion -- which they now have pony up.

In fact, one might expect the political result to be symmetrical, in the other direction.

But the status quoers seem so ideologically opposed to financial markets that they have blinded themselves to stark political reality and *their own side's history*, and constructed some fantasy that SS has been popular because it's been a welfare social insurance program that alleviated poverty.

Hey, *welfare* has been a welfare social insurance program that alleviated poverty -- how politically popular has *it* been?

It's rather ironic: Bush's private accounts can save SS as we know it by putting positive returns back in it, to maintain that *essential and historical* part of it.

The status quoers want to *fundamentally change* SS by driving it into negative returns for everybody, and destroy it politically.

I ask myself why? The only answer I can think of is short-term politics.

I mean, Sweden has private accounts in SS to deal with these problems, and it has survived the trauma, so they can't be *that* right-wing and calamatous an idea.

Swedish social policy -- too right-wing for the Democratic party! ;-)

The Democrats are going to have to get over that if they are going to start winning elections again, I think.

Jim nicely addresses absolutely nothing in that previous post.

"Jim nicely addresses absolutely nothing in that previous post."

Well, I certainly was agreeing with the post that said I was right, and happily expanded on that. That addressed that in that post.

Was there some other previous post I was supposed to address?

"here's the puzzler: ... are there any plausible scenarios in which long-term real GDP growth is less than 2% but long-term real returns (capital gains plus dividends) on stock portfolios are well over 5%?"

What's the puzzle supposed to be? Two answers come to mind right away:

1)
For the last 100 years+ real economic growth has been 3% and the stock market returns have been 7%.

But note -- *compound* stock market returns have been 3%, matching the economy. The payout has been 4% (dividends, stock buybacks, liquidations).

So why couldn't economic growth be 2% with stock market returns of 6%, 4% payout and 2% compound.

What's supposed to be so different about the future than the past?

2)
The relevant economy is the world economy, not the US economy. If anything is going to be globalized in coming decades it will the investment markets.

Why would US stock portfolios pass on investing in high-growth economies such as in Asia?

Jim,

This has been written about before, it is called the Equity Premium Puzzle. It is a puzzle because there is no clear reason for stocks to pay a higher return over the long run than bonds (adjusted for risk of course). If there is then you've found a magical money machine...you can issue bonds at 4% and put them in stocks at 6% and profit by 2%.

If you believe this premium will hold into the future then the most logical actor to do this is the gov't. After all the gov't has the lowest borrowing costs possible and it can hold the stocks as long as it takes. The politics of picking stocks can be eliminating by purchasing a broadly based index fund.

But the problem with counting on the equity premium is that there is no good reason for it to exist. It's easy for people to buy stocks instead of bonds these days. If stocks have higher returns money should flow into them until their returns are equal with bonds and anything else.

The reality is that the equity premium is most likely a historical oddity. Perhaps the Great Depression gave stocks an unfarily bad image that allowed them to maintain a higher return by scaring people away. If so then the premium would be gone as stocks become respectable again.

So why couldn't economic growth be 2% with stock market returns of 6%, 4% payout and 2% compound.

It could but there's a difference between paper returns and realized returns. At the end of the day it is realized returns that count because with private accounts you are going to eat as a retired person by selling your securities to someone who will give you actual money for them.

Paper returns, though, are easier to calculate since all you have to do is compare the price of stock A at 12/31/03 to 12/31/04 to derive a return. Deriving realized returns would require figuring out how much money was put into the stock when it was at $50 and how much cashed out at $75 along with all the little gains and losses inbetween.

"there's a difference between paper returns and realized returns."

Is it your contention that currently retired folks living off their 401ks are not "realizing" returns on their investments?

Wrong, singular, or wrong, plural? Hmmm. Let me count the ways.

1) Estimate I is driven only in part by greater real GDP. More important are the rosier fertility assumptions, mortality assumptions, immigration assumptions, etc. Don't believe me? Look at the June CBO report on Social Security which had a 2.5% real GDP rate and no other significant changes. Drum cannot be more wrong in his conclusion that a simple increase in real GDP to 2.6% will "fix" Social Security.

2) For private accounts to be worthwhile, they only have to return a positive equity premium. The specific return is not important.

3) To his question, stock market returns are only tangentially related to real GDP growth. As government grows as a fraction of GDP, for example, the portion of GDP that is directly "covered" by stocks changes. Therefore, as time marches forward, we should expect real GDP growth to slow down somewhat while stock market returns, based on the private sector, should stay at historical levels.

4) This entire post of his is predicated on the assumption that privatization drives solvency. This is simply not true. See Model 2 of the President's Social Security Commission, or Lindsay Graham's plan scored by the Office of the Actuary. Solvency is obtained by reindexing wages. Privatization's role is to help intergenerational fairness and reduce cash-flows in years with the biggest deficits (in order to help stabilize the Trust Fund ratio). Privatization is necessary, IMO, to *strengthen* Social Security. But *strengthen* is a much broader term than *solvency*. Note that you won't find one reference to improved *solvency* in the Commission's argument for privatization. Notice also that Model 1 from the Commission doesn't help 75 year solvency measures. Still don't believe me? Consider ... all privatization proposals allow *individuals* to keep the greater returns, if they occur. They also all reduce benefits and reduce tax collections. Collections - benefits = surplus. Unless those benefit changes caused by privatization itself are substantially greater than the reduced tax collections, then there is no impact on the system. This is detailed over and over again by the Office of the Actuary in their scored proposals. Privatization helps to make the benefit re-index more palatable to younger workers, so it is critical. But, bottom line, it doesn't significantly affect solvency.

Dang. If you don't mind, I might turn this into a blog post or two for my own blog rather than leaving this buried in the comment section.

Crap. Solvency is obtained by reindexing wages uh ... try "reindexing benefits" ... hope people see through my grammar issues. I commented too quickly, I see. Sorry.

"there's a difference between paper returns and realized returns."

Is it your contention that currently retired folks living off their 401ks are not "realizing" returns on their investments?

Not at all, let me give you a simple example. On 12/31/03 a block of Stock A shares trades for $100. On 12/31/04 a block trades for $110. An economist notes the following:

Stock A
12/31/03 Price $100
12/31/04 Price $110
Return 10%

This is just a paper return, though. It only means that one block of shares was sold for $100 and then for $110. It doesn't mean that a person could have purchased even two blocks on 12/31/03 at $100.

If the economist announced that the gov't could solve its problems by borriwng $100B for a year at 2% and buying up stock A and then selling it on 12/31/04 for a net gain of 8% or $8B we would laugh at him. We would say that trying to purchase $100B of stock A on 12/31/03 would certainly drive its price far above $100 per share and trying to sell $100B on 12/31/04 would drive the price far below $110 per share.

That's an illustration of what I mean by the difference between a paper and realized return.

Megan,

Although it may appear that because .2 + 1.6 equals 1.8, that GDP is a *sum* of these two factors, it's actually the PRODUCT.

Think about it for a second: the number of people times the productivity per person equals the total productivity of the nation. A change to X is a multiplicative change.

It just so happens that 1.002 * 1.016 happens to equal 1.018, or 1.8%.

I would suggest a correction.... although this post is already pretty low in the thread.

-Michael

Michael -- True. Those calcs were from Drum's page, and I think she was just quoting him.

But it is also standard in economics to simply sum the numbers. The difference between the sum and the product is usually extremely small and under any margin of error or rounding.

Shorter libertarianism: the government can find free money by manipulating the capital markets.

At the risk of failing to respond to anything - my favorite explanation of the Equity Premium Puzzle is survivorship bias. NO, not the television show!

As an illustration, survivorship bias would show up in a study that looked at the stock market perfomance of tech companies over a ten year period, but used in the study only the tech companies that were still around at the end of the ten years. Obviously, a real-world investor would have also bought some companies that had failed, and had not survived to be included in the study. Hence, real-world returns would be lower than returns based on a study fraught with survivorship bias.

The same concept *might* apply to US equity market returns. For example, the returns on British equities from 1810 to 1910 (roughly, Waterloo to pre-WWI) were probably pretty good; although the capital markets were different, the equity returns for Austro-Hungarian stock, or German stock, may not have been too bad over that time period, either.

Presumably, the returns of those markets in this century have not been as good.

OTOH, we look at US return from the mid-20's to today and estmate some risk premium. But if the US had lost either WWII or the Cold War, the conversation about the equity risk premium would no doubt have developed quite differently.

SO maybe the past US returns simply reflect the status of an emerging superpower that is not knocked off track; future equity returns and premia might look quite different.

/ He looked down at the credit counseling street. She was right. It refinance stung him, / the pathos of refinance her keen hearing"), but it debt consolidation is a vivid portrait all the refinancing same, razor-sharp and as quick loan as a flea. The lightness of mortgage touch is the saving grace—narrated online loan in standard prose, this would bad credit debt consolidation

Comments are Closed.