On the other hand:
- We are spending tremendous amounts subsidizing housing (guess we are nationalizing Fannie and Freddie) and other political priorities, so as to distort the economy and create bubbles.
- We have interest rates below real inflation, we have the fed buying treasuries and MBS, trying to use monetary policy to "broadly" stimulate the economy, again creating massive distortions.
- We are hiding the true nature of our deficit spending by using social security proceeds, likely spending more than if people really new how much financing is required for the deficit spending.
- We are overall crowding out private investments, and market-based capital allocation with these distortions and deficit spending.
A solutions? The creation of the US Pension Fund.
We can begin with new social security payments and some contribution from the Fed (that would like to stimulate the economy). Later, the US government can begin to fund it (like the states fund their pension liabilities). This would become a fund of $trillions very soon - and eventually tens of trillions!
This fund would need to recruit the best managers and allocate some funds to private fund managers around the world. It would have to balance short-term cash needs (to pay social security benefits) with its ability to make very long-term investments.
The benefits:
- Much better returns than investing in the US government (with scale, less political investment decisions).
- Much better capital allocation (than the US government spending).
- Likely reduced government spending.
- Tremendous stimulus by increasing the money supply by $20 trillion?(as the government and Fed wants to achieve -- but does not have the capability to target spending).
- Big boost to asset management in the US (by supporting US fund managers).
- Source of capital for true long-term investments and R&D.
- Overall, less crowding out of private sector investment.
- Tremendous extension of US financial power around the world.
There must be some lobby that can push this through congress.
