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A small public trust fund has been in place in France for a few years, called the ‘FRR’

Its purpose was to anticipate the burden of the baby boomers by collecting funds while the cohort is still in the workforce. A small additional payroll tax was sufficient to provide the necessary funding by year 2020. But, online installment loans MO strangely enough, the euros never turned up. To this day, the recurrent revenues of the trust are insignificant. The FRR will never meet its target, and the project is almost in jeopardy.

In fact, this is exactly the way the ‘Securite Sociale’ has always managed its pension plan : give out all the money you collect, and collect more when you start needing it. Have they even heard of actuarial calculation? In the end, some cohorts will get a much better deal than others. For sure the system can’t and won’t crash, but there is nothing to be proud of.

I agree that the problem does not come in 2018, if at all, when payroll taxes are less than SS benefit payments. That event is meaningless.

Still, it is not enough to argue that SS has been run responsibly, in the sense that it is adequately funded. That’s a bit like saying that we have responsibly transferred the correct amount from our left pocket to our right to meet the needs of the right pocket.

If doing so has cause the left pocket to be empty, and that the day is coming when we cannot borrow money from the right pocket because it needs its cash for other things, it seems entirely fair to say that we have a “right pocket” crisis

Right now, the SS fund’s positive cash flow, like much of the money we send to China and OPEC, is being invested in Treasury bonds; it is part of the supply side of our capital ;s cash flow decreases, and perhaps even turns negative, the demand for capital will not abate, but the supply will become tighter and tighter, causing an increase in interest rates that will affect not only the government’s general account but the underlying functioning of our entire capital system. (The bond bone’s connected to the stock bone, tra la.)

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