>This is addressedto Doug or anyone to knows something
>about financial markets. Read a theory, arguing
>against SS privatization and more generally on the
>reliance of American retirement security on the stock
>marjet, that in about 10-15 years, when the second
>wave of boomers (my cohort, 1955-65) retires and
>starts to cash in their IRAs & 401(k)s, this being the
>first generation to rely more on these and not to have
>pensions, that this will begin to exert a long term
>downward pressure on the stock market just in virtue
>of increasing supply (more selling than buying) that
>will last more or less till that cohort is dead. Is
>that crackpottery, or reasonable or-- is it just
>impossible to say given the range of things that might
>happen in the market, or what? Is it a consideration
>to take seriously in arguing with wobbly liberals
>about retirement security?
It's something to be taken seriously. All retirement systems, taken as a whole, are basically pay-as-you-go funds. That's obvious with a public system, like Social Security, which pays today's benefits with today's taxes. But there's nothing magic about a stock-market-centered system that can escape this logic. Money going out must be matched by money going in. Capital gains are nice, but they are only meaningful if they can be realized with someone's cash. The economic logic to this is that money represents/is valorized by current production. A society as a whole can't satisfy tomorrow's needs with today's cash or today's production.
There's a profound passage from Keynes that makes this point:
>Effective demand can be derived only from present consumption or
>from present provision for future consumption. The consumption for
>which we can profitably provide in advance cannot be pushed
>indefinitely into the future. We cannot provide for future
>consumption by financial expedient but only by current physical
>output. In so far as our social and business organisation separates
>financial provision for the future from physical provision for the
>future so that efforts to secure the former do not necessarily carry
>the latter with them, financial prudence will be liable to destroy
>effective demand and thus impair well-being, as there are many
>examples to testify. The greater, moreover, the consumption for
>which we have provided in advance, the more difficult it is to find
>something further to provide for in advance, and the greater our
>dependence on present consumption as a source of effective demand.
>Yet the larger our incomes, the stronger, unfortunately, is our
>propensity to withhold our income from present consumption. So,
>failing some novel expedient, there is, as we shall see, no answer
>to the riddle, except that there must be sufficient unemployment to
>keep us so poor that we are discinclined to set aside more gross
>savings than the equivalent of the physical provision for future
>consumption (including replacements) which it pays to produce today.